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Investing.com -- Shares of Rocket Lab USA, Inc. (NASDAQ: RKLB) fell 10% as investors reacted to a critical short report by Bleeker Street Research, which cast doubt on the company’s projected timelines and financial health.
The report, released amid a broader market downturn, challenged Rocket Lab’s claims regarding the launch schedule of its Neutron rocket and suggested potential financial strains. According to Bleeker Street, Rocket Lab has significantly overpromised the readiness of its Neutron rocket, which is intended to compete with SpaceX’s Falcon 9. Industry experts consulted by the short seller estimate a delay of one to two years beyond the company’s stated mid-2025 launch target.
Further scrutiny was placed on the development stages of the Neutron program, with claims that Rocket Lab is lagging in critical areas such as engine development, production capabilities, and infrastructure for launch preparations. The report also highlighted concerns over the company’s most lucrative potential contracts, suggesting Rocket Lab may miss out on the National Security Space Launch’s Phase 3 Lane 1 program due to the delays.
Compounding the issue is the nature of Neutron’s sole announced launch contract with E-Space, described as an undercapitalized startup. The report raises questions about the viability of this customer and the pricing of Neutron’s launch slots, which may be selling below the stated price despite management’s assertions to the contrary.
Financially, Rocket Lab’s liquidity position is under scrutiny, with the report forecasting a need for additional capital to complete and profitably launch Neutron. The cost of development is estimated to be between $300-$600 million, which could lead to fundraising needs given Rocket Lab’s cash reserves of $504 million as of September.
The short report surmises that without the Neutron rocket, Rocket Lab’s current valuation cannot be justified, especially as SpaceX’s offerings have already eroded the market for Rocket Lab’s smaller Electron rocket. The report concludes with a stark outlook on Rocket Lab’s revenue goals and overall financial sustainability.
As of now, Rocket Lab has not responded to the allegations made in the report. Investors have reacted to these claims, leading to the significant drop in stock value during the trading session.
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