Why Redwire Stock Keeps Dropping

Is Space Exploration Technologies (NASDAQ: SPCX) stock bad for space stocks? In a year that saw Redwire (NYSE: RDW) stock double in the run-up to the SpaceX IPO, that sounds like a strange question, but here's the thing:

SpaceX might be both good and bad for space stocks like Redwire.

Case in point: This morning, SpaceX announced plans to float (a rumored) $20 billion of debt in what it's calling its "Inaugural Bond Issuance." SpaceX stock is down 10.5% through 12:50 p.m. ET on the news, and Redwire is down 8%.

SpaceX wants (not needs) a loan

SpaceX just raised more than $80 billion in its wildly popular initial public offering. Post-IPO, the company has "approximately $100.8 billion in cash and cash equivalents" available.

So why is SpaceX seeking another $20 billion?

The biggest clue is SpaceX emphasizing the "inaugural" nature of this bond issuance. There's never been a market for publicly traded SpaceX bonds before. Presumably, one thing SpaceX hopes to accomplish with this bond offering is to gauge how popular its bonds are with investors today -- how much money it could raise if it needed to, and how much interest it would have to pay.

What this means for Redwire stock

This is why I consider the bond offering neither good nor bad news for SpaceX stock. But for Redwire, I fear the SpaceX bond offering is nothing but bad news.

Think about it. SpaceX just held an IPO that sucked $80 billion out of the market for space investors. Now, SpaceX is raising another $20 billion from investors looking to lend money to space stocks.

SpaceX is sucking all the figurative air out of the room. Cash-burning space stocks like Redwire could soon find it harder to raise the money they need.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.