Space stocks are in a deep sell-off today, June 12, continuing a downtrend that started in May this year. Rocket Lab (RKLB) stock price plunged to $105, down by 30% from its highest point this year.
SPCE, RKLB, RDW, and LUNR Stocks are Plunging
Virgin Galactic (SPCE) stock plunged to $4.3, down by over 50% from the year-to-date high. Redwire (RDW) stock fell to $15, while Intuitive Machines (LUNR) fell to $27, down by 41% from the year-to-date high. The Procure Space ETF (UFO) and Tema Space Innovators (NASA) ETFs have also plunged, erasing millions of dollars in value.
These space stocks have plunged in the past few weeks as investors booked profits ahead of the SpaceX IPO, which happened today. The company has raised over $75 billion, with its valuation surging to over $1.78 trillion.
This concept is known as buying the rumor, selling the news. It is a situation where investors buy assets ahead of a major event and then sell it when the event happens. In this case, they bought the shares ahead of the IPO and then dumped them since it had already happened.
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Another reason for the crash was that some investors sold their shares to invest in the SpaceX IPO. This explains why the company received huge orders worth over $300 billion.
Fundamentally, there are also concerns that these companies became highly overvalued as investors accelerated their buying. For example, data shows that Rocket Lab has a forward price-to-sales ratio of 72, much higher than most companies. For example, a blue-chip name like Nvidia has a multiple of 12.
Intuitive Machines has a multiple of 6, while Redwire has 7. Virgin Galactic is not making substantial revenue as it plans its flights later this year. All these companies are no longer making profits.
Technicals Also Explain the Space Stocks’ Weakness
Technicals also explain why space stocks are crashing on SpaceX IPO date. A good example of this is the UFO ETF, which jumped to a record high of $68.3 in May.
At that time, the Relative Strength Index (RSI) jumped to the extreme overbought level of 80, and has now moved to 45. It is common for highly overbought assets to retreat as investors book profits.
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