SpaceX’s debut is weighing on aerospace sector shares
From Rocket Lab to Virgin Galactic, space economy shares are taking a hit on Wall Street following the arrival of Elon Musk’s flagship company
Key points
- Portfolio rotation for Rocket Lab
SpaceX’s massive $75 billion IPO last week had a seismic impact on the space economy sector listed on Wall Street. From the perspective of celestial mechanics, the introduction of a sufficiently massive body into a region of space can alter the local gravitational potential and modify the structure of stable orbits: that is to say, less massive bodies may enter orbital resonance, undergo a change in gravitational trajectory or be ejected from the system. The same thing happened to those companies that operate in the same sectors as Elon Musk’s group and have been listed on the New York Stock Exchange for some time. They had to make way for the passage of the new celestial body. Thus, in a single day, the negative fluctuations ranged from 10% to 30%.
Portfolio rotation for Rocket Lab
The world of space companies listed on Wall Street can be divided into a number of major segments, many of which overlap, at least in part, with SpaceX’s activities.
In the space launch sector, the main listed competitor is Rocket Lab, which many investors consider to be the company most closely aligned with SpaceX’s business model. Both companies are active in space access and the development of reusable launch vehicles, although their scale and capabilities still differ significantly.
For months, the company has effectively been one of the few listed instruments offering indirect exposure to the private space market, particularly as a proxy for retail investors seeking exposure to SpaceX’s value. With the launch of SpaceX’s listing, there is no longer a need to use Rocket Lab as a substitute vehicle for exposure to the sector, and some of the investors who had bought the stock are therefore reallocating their capital. Analysts note that this is therefore a matter of portfolio dynamics, not a deterioration in fundamentals.
In the first quarter of the year, Rocket Lab (down 10.8% on 12 June on the stock market) reported record revenues and a backlog (the total value of orders already signed but not yet fulfilled or recognised as revenue) at an all-time high: $344.1 million and $2.2 billion respectively. Around two-thirds of revenue now comes from the Space Systems segment, which includes the Photon platform, satellite manufacturing and space components. This indicates a gradual shift towards a business model offering higher margins and greater predictability compared to launch services alone.
