York Space and Firefly aboard SpaceX’s Coattails. Small Space Stocks Make Strong Profits.

Last Wednesday was a good day to be a local investor. (Thursday and Friday, at least!)

Rumors that SpaceX would file its IPO prospectus, which turned out to be false, fueled space stocks. Shares of recent IPO sites York Space Systems (NYSE: YSS) and Firefly Flight (NASDAQ: FLY) increased by a staggering 5.1% and 16%, respectively, on Wednesday.

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However, that enthusiasm did not last long. By Thursday, York had returned all of Wednesday’s gains. (York started to recover Friday, however.) Firefly was down just 2.6% on Thursday — but is now trading up 11.6% on Friday.

It would appear that SpaceX’s coattails are shorter than many investors expected.

Or maybe investors were just too impatient? After all, I whispered among all the people excited about the possibility of SpaceX perhaps file for its IPO last the week was a warning that it could stop until this a week instead. If I had to bet, I’d bet that we’ll see a SpaceX prospectus – and have an opportunity to invest in SpaceX – in no time.

However, that won’t be good news for York and Firefly.

Consider what we know about these three area stocks. Although the lack of a prospectus means we are still guessing at this point, many analysts believe that SpaceX is probably a $16 billion a year company that earns about $3 billion in annual profits. It is a space giant with its fingers in many space pies, from rockets to satellites to artificial intelligence (orbital data centers).

York Space is a very small operation. Estimated at $2.7 billion in market capitalization, it’s a round error close to SpaceX’s rumored $1.75 trillion market cap. Focused mainly on building satellites, York boasts only $386 million in annual profit but loses $84.5 million a year and burns $130 million in negative free cash flow.

The carriage in stock it’s slightly bigger than York with a $3.7 billion market cap, but Firefly’s business is smaller. Watches that go for less than $160 million. Annual losses exceeded $334 million last year. Free cash flow was $238 million.

Remove names. Forget about fame. In any competition between a small unknown, unprofitable, cash-burning company and a profitable rival 400 to 600 times its size, who do you think will win? Which stock would you like to own?

This is my biggest worry about the SpaceX IPO, at least in the near term. Over time, yes, history is full of stories of small companies overcoming challenges and growing to defeat their larger rivals. But in the short term, I expect that many investors will evaluate their options and decide that they would rather own stockX than York or Firefly — or anyone else in the space. I worry that investors will sell these other stocks to buy SpaceX stock.

Rather than giving coattails for its rivals to ride, my guess is that the SpaceX IPO will pull the barrel out from under them.

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Rich Smith has no position in any of the products mentioned. The Motley Fool has no position in any of the products mentioned. The Motley Fool has a publicity strategy.

York Space and Firefly aboard SpaceX’s Coattails. Small Space Stocks Make Strong Profits. was originally published by The Motley Fool