Investors in small rocket launcher Rocket Lab USA (RKLB 3.29%) are having an exciting day on Thursday.

Last night, Rocket Lab announced its first rocket launch of 2024, and its first recovery of a rocket from a water landing this year. The space company also announced the preliminary results for its fourth and final quarter of 2023. And how was that news?

Here's a hint: Through 11 a.m. ET, Rocket Lab stock is down 18.6%.

Rocket Lab Q4 sales and earnings

"Based on the information available to us as of the date of this release," said CEO Peter Beck (official, audited numbers won't be available until Feb. 27), it looks like Rocket Lab is going to report somewhere between $59 million and $61 million in Q4 revenue. Those aren't objectively bad numbers, up about 16% year over year at the midpoint. But Rocket Lab's sales still aren't going to be nearly as good as the $66 million that Wall Street was hoping the company would report.

Profitability continues to improve at the small rocket company, with gross profit margin expected to exceed 25% -- well up from 2022's low-single-digit gross margin. Still, with sales growing 16% and operating costs rising 62% year over year, it's pretty obvious that Rocket Lab isn't going to be reporting any profits anytime soon. For the quarter, Rocket Lab expects a net loss of anywhere from $49 million to $52.5 million according to generally accepted accounting principles (GAAP) -- at least $0.10 per share.

Rocket Lab needs cash for fuel

And here's the thing: With Rocket Lab unable to earn the profits or generate the cash it needs to fund its operations, and continuing to spend freely as it develops its next-generation Neutron rocket, management has concluded that Rocket Lab must tap the public markets again for more cash. Concurrently with its earnings preannouncement, therefore, Rocket Lab announced that it will be privately offering anywhere from $275 million to about $316 million worth of convertible senior notes (that's debt, convertible into shares) for sale.

Initially, that's going to roughly triple the company's debt load (currently $162 million, according to data from S&P Global Market Intelligence). Later on, if the debt is converted into shares at something near today's $4-ish share price, it could expand the company's share count by as much as 79 million new shares, diluting existing shareholders out of about 16% of their ownership interest in the company.

So if you're wondering why Rocket Lab stock is down so much today, well, now you know.