NEW YORK – Rocket Lab (NASDAQ:RKLB) shares are testing a critical contractual support level after a steep weekly decline brought them within cents of the $67.50 floor in its proposed acquisition of Iridium Communications (NASDAQ:IRDM). The stock closed Friday at $67.62, just 12 cents above the lower limit of the deal collar, following a 16.6% drop over the past week. The broader Nasdaq Composite fell 2.9% over the same period, underscoring the magnitude of Rocket Lab's underperformance.
The $8 billion all-stock deal, which represents roughly 20% of Rocket Lab's market capitalization as of Friday, includes a collar mechanism that adjusts the exchange ratio based on Rocket Lab's share price. If the volume-weighted average price (VWAP) over the ten trading days ending two sessions before closing falls below $67.50, the exchange ratio is fixed at 0.4000 Rocket Lab shares per Iridium share. This limits the number of shares Rocket Lab issues but also reduces the implied value to Iridium holders. At the floor, each Iridium share is valued at $54, matching the nominal offer price, while a drop to $60 would lower that value to $51. Conversely, if Rocket Lab's VWAP exceeds $112.50, the ratio caps at 0.2400, keeping the value at $54 per Iridium share until the price reaches $130, where the value rises to $58.20.
Iridium shares closed Friday at $46.68, a 13.6% discount to the $54 offer price, highlighting the market's skepticism about the deal's completion timeline and terms. The gap reflects concerns over regulatory approvals, financing costs, and the risk that Rocket Lab's stock could fall further, reducing the payout to Iridium shareholders. Iridium reported 2.55 million subscribers and $871.7 million in revenue for 2025. Rocket Lab posted first-quarter revenue of $200.3 million and a $2.2 billion backlog, with second-quarter revenue guidance of $225 million to $240 million.
The deal's structure means that any additional decline below the $67.50 floor would not reduce the number of shares issued but would directly lower the deal's value, increasing the economic risk for Iridium investors. Rocket Lab's share issuance is capped at approximately 42.4 million shares at the floor, based on 105.96 million Iridium shares outstanding, and drops to around 25.4 million at the ceiling. The asymmetry of the collar means that downside risk is not matched by upside potential, a point that analysts have noted as a key risk factor.
Beyond the collar, the broader space sector has also faced headwinds. Redwire Corporation (NYSE:RDW) fell 17.0% last week, mirroring Rocket Lab's decline. Rocket Lab's operational news was positive—the company successfully conducted a nearly 5.5-minute full-duration burn of its vacuum Archimedes engine, which will power the second stage of the Neutron rocket. CEO Peter Beck described the Iridium agreement as "a defining moment for the space industry." However, investor focus remains on the deal's mechanics and the $67.50 level.
Rocket Lab has no investor events scheduled this week, but market participants are monitoring the stock's price action around the collar, potential updates on Neutron development, and the awaited S-4 filing with the SEC. No filing date has been set. Primary risks include Neutron delays, financing costs, regulatory scrutiny, and the need for Iridium shareholder approval. A sustained drop below the collar could erode investor confidence and complicate the deal's approval process.
The $67.50 level is not a traditional technical support but rather a contractual pivot point. As one analyst noted, "It reflects the point at which the agreement shifts the next dollar of price risk." With the deal expected to close in mid-2027, the coming weeks will be critical for Rocket Lab as it navigates both market volatility and the complexities of its largest acquisition to date.
