It's always hard to wait, and investors are on edge as the Federal Reserve's Open Market Committee begins a two-day meeting on Tuesday to discuss the future path of interest rates. Many market participants believe that the Fed will hold off on making any changes at this meeting, but the opinions that committee members express could shed light on future plans for the central bank. Stock market index futures were slightly higher in premarket trading, but on the whole, traders appear to be waiting for further clarity from the Fed before taking aggressive positions.
Unfortunately, some stocks had to deal with big declines. Nio (NIO 8.72%) shares lost ground on a capital-raising move, but the big decliner on the day was Rocket Lab USA (RKLB 3.29%), which had a tough situation arise on its most recent launch earlier today. Below, you'll learn everything you need to know about what's happening with both companies.
Nio taps the capital markets
Shares of Nio were down 6% in premarket trading, falling back below the $10-per-share level. The Chinese electric vehicle (EV) manufacturer has made some progress in recent months with its business, but investors weren't pleased with its latest move to raise cash.
Late Monday, Nio announced that it would conduct an offering of convertible senior notes. The automaker hopes to raise $1 billion in the sale, with $500 million in five-year debt and another $500 million in notes maturing in six years. Initial purchasers of the notes will have the ability to buy as much as $150 million in additional securities at their option.
Presently, Nio hasn't yet priced the convertible notes, but it's likely that investors will have the right to convert their debt securities into common shares at a price slightly above the current level of the stock. That typically means that current investors are subject to potential dilution, as if the share price rises above the conversion price between now and the time of the notes maturing, then the holders of those notes will inevitably convert their holdings into stock and pay less than what the stock will be worth at the time of conversion.
Nio isn't the only EV company looking to raise cash in the current environment, and it said it intends to use the capital to refinance existing debt and strengthen its balance sheet. In such a capital-intensive industry, having money on hand is important. The level of competition that Nio faces is fierce enough that it needs every edge it can get -- even if it means disappointing current shareholders.
Rocket Lab deals with mission failure
Shares of Rocket Lab suffered an even bigger decline, falling 19%. The space launch specialist got bad news after its latest launch didn't go as expected.
Rocket Lab sought to launch its 41st mission from New Zealand, carrying a radar-imaging satellite from Capella Space into orbit. The liftoff initially went well, with first-stage engines firing and the payload reaching an altitude of about 100 kilometers as stage separation went as planned. However, about two and a half minutes into the flight, an anomaly arose that forced the mission to end.
This isn't the first failed mission Rocket Lab has had, but it has been about two years since the most recent failure. The company has previously delivered 171 satellites to orbit in 37 successful missions.
Rocket Lab now expects to delay its next planned launch, which had been scheduled to occur before the end of September. Investors therefore need to expect reductions in third-quarter revenue, and that could put a big dent in Rocket Lab's aspirations to compete against SpaceX and other launch specialists.
