Space SPACs: The Reckoning Ahead
Inflation is up, stocks are down and access to capital has become increasingly constricted. All that means big challenges for space companies trying to raise money and stay in business, experts said during the AIAA’s ASCEND conference in Las Vegas this week.
Space companies that went public by merging with special purpose acquisition companies (SPACs) over the past three years are at particular risk. John Olds, principal engineer at SpaceWorks Enterprises, estimated that up to 50 percent of space SPACs will cease to operate as independent companies due to the worsening economy.
Olds showed a slide of SpaceWork’s NewSpace Index that compares the performance of a group of newer space companies with traditional space companies, the Dow Jones Industrial Average and the S&P 500. The NewSpace companies were performing far worse.
Phil Ingle, managing director at Morgan Stanley, said some companies will fail while others will go through the merger and acquisition (M&A) process. He cautioned that M&A should not been seen as a failure.
Nathan Whigham, founder and president of EN Capital, believes that the next step for some space SPAC companies will be to go private again.
A SPAC is a “blank check” investment company that is already traded on a stock exchange. SPACs typically have two years to identify and merge with a company, which then goes public under its own name.
Virgin Galactic kicked off the space SPAC trend three years ago by merging with billionaire Chamath Palihapitiya’s Social Capital Hedosophia. The company began trading on the New York Stock Exchange on Oct. 28, 2019.
Space SPAC Index
| Company | First Trading Day | Opening Share Price | High | Current Price (10/26/22) |
|---|---|---|---|---|
| Arqit (NAS: ARQQ) | Sept. 7, 2021 | $9.25 | $41.52 (9/23/21) | $4.19 |
| Astra Space (NAS: ASTR) | July 1, 2021 | $12.30 | $16.95 (7/2/21) | $0.55 |
| AST SpaceMobile (NAS: ASTS) | April 7, 2021 | $11.63 | $15.48 (6/30/21) | $6.16 |
| BlackSky (NYS: BKSY) | Sept. 10, 2021 | $11.80 | $13.20 (9/16/21) | $1.57 |
| Momentus (NAS: MNTS) | Aug. 13, 2021 | $10.85 | 12.87 (9/7/21) | $1.20 |
| Planet Labs (NYS: PL) | Dec. 8, 2021 | $11.25 | $11.65 (12/8/21) | $4.82 |
| Redwire (NYS: RDW) | Sept. 3, 2021 | $10.70 | $16.98 (10/25/21) | $2.35 |
| Rocket Lab (NAS: RKLB) | Aug. 25, 2021 | $11.58 | $21.34 (9/9/21) | $4.70 |
| Satellogic (NAS: SATL) | Jan. 26, 2022 | $9.19 | $10.92 (5/4/22) | $4.93 |
| Spire (NYS: SPIR) | Aug. 17, 2021 | $10.25 | $19.50 (9/22/21) | $1.24 |
| Terran Orbital (NYS: LLAP) | March 28, 2022 | $12.69 | $12.69 (3/28/22) | $2.37 |
| Virgin Galactic (NYS: SPCE) | Oct. 28, 2019 | $11.79 | $62.80 (2/4/21) | $4.49 |
| Virgin Orbit (NAS: VORB) | Dec. 30, 2021 | $8.525 | $11.28 (1/11/22) | $3.01 |
A dozen other companies, including Virgin Orbit, went public through SPACs in the years that followed. All of the companies are trading below the price at which they debuted as well as their high.
Virgin Galactic began trading at $11.79, peaked at $62.80 in February 2021, and was trading at $4.49 on Wednesday. The company had planned to begin commercial suborbital spaceflights in June 2020, but technical problems have delayed the start of service until the middle if 2023.
The story is the same across the board. Launch provider Astra Space, which has suffered a string of booster failures, is currently trading at $0.55. Astra has received a notice from Nasdaq that it will be delisted unless it can raise its stock price to $1.
Rob Meyerson, CEO of Delalune Space, noted that while some space SPACs are having difficulty executing on their business plans, others companies are in much better shape. ASCEND speakers noted that stocks are down across the board, not just for public space companies.
ASCEND speakers noted that while some space SPACs have had difficulty executing on their business plans, other companies are in much better shape.
Asked whether the declines in space SPAC stock was making pitching their companies more difficult, Redwire Space President and COO Andrew Rush responded that the downturn is short term. He instead emphasized the many additional options that exist today for raising investment capital that did not exist five or 10 years ago.
10 responses to “Space SPACs: The Reckoning Ahead”
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Yup. Both SPCE and VORB are done, and ASTR obviously.
The rest will likely get culled to an extent as well, with higher changes of survival for the ones with an actual product to sell ( SPIR BKSY PL RKLB and SATL )
RDW gas more revenue than SPIR, BKSY, PL, SATL, and after their latest acquisition they’ll have almost as much as RKLB.
And all of that revenue is basically from one-off government contracts with no growth prospects
Redwire has a considerable product portfolio of satellite and space station parts which it has put together via acquisitions. It’s pretty much Rocket Lab without any rockets. It’s not a Beltway bandit crumb-chaser operation.
They aren’t selling anything substantial to any commercial customers. No satellite builders are issuing volume orders to anything they have in the portfolio. Civil+defense makes up majority the stable revenue, “commercial” is one-off experiments only.
They even admitted “high volatility” and “slower than expected” commercial market in the last earnings call.
I think you’re right about SPCE. It doesn’t seem to have remotely enough money to do what it plans to do and no real prospects of raising significantly more. VORB is a different situation. They have contracts, a lot of interest from small foreign spaceports and a decent cash position so far as I know. ASTR is, at best, on the bubble but could still squeak by.
SPAC’s… seemed like a good idea at the time. I see how companies like these promote themselves. SPACs are obviously intended to fleece their investors who see “Space” in the title and just throw their money in hoping to catch the next SpaceX. If SPAC investors ever bothered to do even a little due diligence, or study the companies and their so called “plans” even a little, they’d know that they aren’t serious and have about zero chance of ever coming to fruition. I mean come on, Astra’s latest quarterly financial presentation on YouTube… none of their graphs and plans even have numbers! Alll of these companies spin a tale that they have the “secret sauce” that’s going to make them the next SpaceX, and the fools believe it. Run the numbers and none hold water. Oh well, “fools and their money…”
SPACs were a good idea at the time. They were a way of avoiding having to learn all the ins and outs of Sarbanes-Oxley compliance instead of taking care of one’s actual business in order to do an IPO.
Careless investors – especially those chasing a “sure thing” – tend to get clipped. But even investors who consult “top…. men” can execute controlled flights into terrain. Goldman-Sachs recently advised all of its clients to dump U.S. exchange-traded index funds and plow everything into PRC stocks. U.S. exchange-traded index funds have, indeed, taken recent hits as they reflect the general trend of their particular markets. Put the bottom fell out of PRC markets a few days after this bit of sterling advice had been issued. At last count, the losses on the PRC exchanges run north of $8 trillion – with a ‘t.’ As the late Yogi Berra famously said, “It’s hard to make predictions, especially about the future.”
In any case, the fortunes of investors who are now looking at underwater investments are quite distinct from those of companies that banked the loot when things were good and still have it now that things are not good.
Which supports my second thesis: The “experts” are usually wrong. 🙂
The results of getting caught up in an investor fueled craze.. whoever survives and comes out on the other side will prosper greatly