Intuitive Machines is using the stock market’s recent strength to raise needed capital. It’s a smart idea, but one that showsspace valuationsare stretched.
It’s the latest example of a growing trend: stock sales coming after big rallies.
On Wednesday, the maker of lunar landers and other space technology announced plans to sell $5oo million in stock. That sent shares down 12% in early trading to $34.69, while the S&P 500 and Dow Jones Industrial Average were off 0.4% and 0.8%, respectively.
The move comes after an epic rally. Coming into Wednesday trading, Intuitive Machines stock had surged 54% over the past month. Most space stocks have rocketed higher as the massive SpaceX initial public offering approaches.
Elon Musk’s reusable rockets and Starlink space-based broadband product have shown investors what’s possible in space. Now, the company is raising cash to tackle orbital artificial-intelligence computing. The IPO, expected to be wrapped up in days, will raise record amounts of cash and could value the company at $1.8 trillion.
Other space companies have been using the updraft to raise capital. Space tourism pioneer Virgin Galactic and space vehicle maker Firefly both recentlyannounced planstoraise money.
Intuitive, Virgin, and Firefly aren’t profitable yet, making fresh capital welcome.
Along with capital raises, there have been other signs that space stocks are stretched. Jefferies downgraded shares of Redwire to Hold from Buy earlier this week. Deutsche Bank recently downgraded shares of AST SpaceMobile after the explosion of Blue Origin’s New Glenn rocket. (AST relies partly on New Glenn to get its communications satellites into orbit.)
To be sure, the space economy is booming. Coming into Wednesday trading, shares of Rocket Lab were up 56% over the past month and up 362% over the past year. The industry still needs capital to achieve consistent profitability, though. Investors will have to watch the trends to ensure they don’t get caught when some stocks fall back to Earth.
Gains have left Rocket Lab stock trading for almost 70 times sales expected over the coming 12 months, up from about seven times three years ago.