Why Planet Labs Stock Crashed Today

So I guess I was both right and right about the SpaceX (NASDAQ: SPCX) IPO.

Right, when I predicted SpaceX IPO fever might drive space stocks higher this year. Indeed, shares of spy satellite operator Planet Labs (NYSE: PL) are up 38% over the last four months.

Unfortunately, I was also right about what would happen on IPO day. And this, in a nutshell, is why Planet Labs stock fell 9% through 12:50 p.m. ET today.

Three scenarios for SpaceX and space stocks

Four months ago, I ran down three theories for how the SpaceX IPO might play out, both for SpaceX and for other space stocks. Briefly, these scenarios were:

• Option 1: SpaceX IPO fever could make space stocks more popular, driving up their stock prices.
• Option 2: SpaceX could make space stocks not named SpaceX less popular, if they suffered by comparison to SpaceX, which seemed both much bigger and more profitable than SpaceX's competitors.
• Or Option 3: Investors wanting to buy SpaceX stock might sell shares of other space stocks to raise cash to buy SpaceX instead.

What's next for Planet Labs stock

The fact that Planet stock went up so much in four months means I was right about Option 1. The fact that Planet stock is selling off today -- the same day investors began paying for their new SpaceX IPO shares -- suggests I was right about Option 3 as well.

And Option 2? This remains to be seen. SpaceX's IPO prospectus made clear SpaceX isn't profitable as we once believed -- instead, it's losing money and burning cash. So bigger isn't necessarily better.

Planet stock may not be profitable, but it is generating positive free cash flow. For that reason if for no other, I prefer Planet stock over SpaceX stock today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Planet Labs PBC. The Motley Fool has a disclosure policy.