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What happened

The CEO of Rocket Lab USA (NASDAQ: RKLB) sold about $22 million worth of company stock. Investors tend not to like insider shares, and Rocket Lab shares did fall as a result, down nearly 15% for the week as of mid-day Thursday, according to data provided by S&P Global Market Intelligence.

So what

Rocket Lab is part of a new generation of space stocks that have hit the markets in recent years, and the company has established itself as one of the better operators among that group. Rocket Lab has a steady cadence of launches and was able to generate $62.05 million in sales in its most recent quarter, though it is still operating at a loss.

Founder and CEO Peter Beck took advantage of a post-earnings window where insider sales are allowed. In a regulatory filing released this week, the company disclosed that Beck sold 3.6 million shares, raising a little more than $20 million.

Rocket Lab shares fell after the disclosure. Investors sometimes read into insider buys and sales, assuming that the CEO knows more about the health of the business than any outsider. Rocket Lab has been a volatile stock since joining public markets in August 2021, and has risen and fallen by 10% or more on many days on little to no news.

Now what

It is worth noting that even after that sale of 3.6 million shares, Beck still owns 50.95 million. That gives him ample skin in the game, owning about 10% of the company’s shares.

Rocket Lab is steadily building a solid business, but the company is still in the early stages of its ramp and years away from profitability. Beck is an entrepreneur, and most of his net worth is tied up in the company’s shares.

So although it is possible that the share sale is an indication Beck is losing faith in the company, the more likely explanation is he is selling a small amount of his holdings for liquidity while holding on to the bulk of his stake as he continues to guide Rocket Lab forward.

If that’s the case, the market’s reaction to the sale will likely self-correct in the weeks to come.

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Lou Whiteman has positions in Rocket Lab USA. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.

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