What happened
Shares of Rocket Lab USA (RKLB 3.57%) tumbled on Monday after the new space IPO and occasional defense contractor filed with the Securities and Exchange Commission (SEC) an amended S-1 registration statement in relation to shares its insider shareholders may or may not sell in the future.
As of 11:30 a.m. EDT, Rocket Lab stock is down 8.1%.
Image source: Getty Images.
So what
Here's the funny thing: There's really nothing in Rocket Lab's amended S-1 to get upset about.
Granted, seeing nearly three dozen attachments appended to the filing, investors may be worried that there's something buried in there to worry about. But as the company explains in the filing itself, "no changes have been made to the preliminary prospectus," and the S-1 was refilled "solely for the purpose of filing exhibits 5.1, and 23.3."
And having reviewed those documents myself, I can confirm: All those exhibits do is add an opinion from the company's auditors confirming that everything is hunky-dory with its plans to issue shares upon exercise of warrants, earnouts, and other IPO-related business.
Now what
Of course, that might be exactly the problem: In amending its S-1 and causing an S-1/A notification to go out, Rocket Lab just reminded investors that as part of its IPO, there's the potential for a lot of new shares to be issued and/or sold in the future, including:
- 347.3 million shares that were either "issued or issuable at the consummation of the Business Combination" or issuable as "Earn-Out Shares."
- 46.7 million shares issued to "certain investors in connection with the Business Combination" that brought Rocket Lab public.
- 16.3 million shares issued "upon the exercise of outstanding warrants originally issued by [Rocket Lab's SPAC partner] and converted in the domestication" of the company.
- 8.9 million shares "underlying outstanding stock options and restricted stock units."
- 8.0 million shares issued "in exchange for shares of [the SPAC's] Class B ordinary shares."
- 5.6 million shares issued upon exercise of "private placement warrants."
- Just under 0.9 million shares already "issued on cashless exercise of warrants."
Add 'em all up, and we're talking some 433.7 million shares of Rocket Lab, worth about $6.3 billion at current prices, that could potentially come up for sale and put those current prices at risk. With that prospect ahead of them, no wonder investors are nervous!
