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Last week, it was announced that Virgin Orbit, a satellite launch startup and sister company of Virgin Galactic (SPCE), will be the latest spacefaring company to go public through a merger with a special purpose acquisition company (SPAC).
Virgin Orbit has hired Credit Suisse Group AG and LionTree LLC, and is shopping for a SPAC merger partner that could take it public with a value ranging from $2.5 billion to over $3 billion, according to sources cited by the Wall Street Journal.
The SPAC route is one that Virgin Group, which maintains an 80% ownership stake in Virgin Orbit, has traveled before, having used a blank-check company to take its space-tourism business Virgin Galactic Holdings Inc. public in 2019.
Virgin Galactic, a firm focused on space tourism, definitely set the tone for many SPACs to follow. Since its merger with Social Capital Hedosophia in October 2019, valuing the company at $1.5 billion, Virgin Galactic’s share price has nearly tripled. Though the company has been racked by numerous delays for years, the company believes that, at scale, it will do about $1 billion in annual revenue per spaceport. Per InvestorSpace, that equates to about 10 spaceships, doing about 5 flights per months, with 6 paying passengers on each flight, and an average ticket price of around $300,000. Virgin Galactic plans to have two of those spaceports operational by 2030.
Based on those lofty forecasts and lack of peers to compare such a business model to, it is easy to see why traditional IPO investors may have a hard time valuing spacefaring companies with small streams of revenue. In a SPAC offering, a target company can disclose management’s forward-looking projections prior to the completion of the offering, which can help justify more expensive valuations.
Additionally, SPAC offerings provide a more favorable capital structure for companies that are operating on narrow budgets. As GigCapital writes, SPAC entity sponsors typically pay a 2% underwriting fee at the time of the SPAC offering, with an additional 3.5% underwriting fee (i.e. based on the SPAC IPO size) paid by combined company at the completion of merger. By comparison, the traditional IPO fees are typically 7% of the proceeds raised through the IPO process.
Though we are still awaiting the first traditional space IPO, Quartz reports that seven SPACs have already made deals to bring space firms public at a cumulative value of more than $20 billion. This method of financing is especially appealing to satellite, analytics, and rocket startups operating in the space industry because their success is predicated on pioneering innovative business models with little precedent.
SPACs really took off in 2020 and 2021, sweeping up startups in some of the most groundbreaking industries, bringing advances in electric vehicle charging, quantum computing, and other cutting edge tech into secondary markets. While all of that has certainly injected a new sense of excitement into 2021’s list of IPOs, it is critical to understand that the more speculative projections and technologies associated with many SPAC listings may present higher risk for investors.
Below is a shortlist of upcoming SPAC listings in the private space business that will begin trading later this year:
Rocket Lab (RKLB) – Q2 2021
Earlier this month, MRP highlighted Rocket Lab’s upcoming SPAC offering. The company, an industry leader in 3D printed rockets whose backers have included defense giant Lockheed Martin Corp., has successfully launched 97 satellites into orbit. Rocket Lab (which will begin trading under the ticker RKLB) is in talks with Vector Acquisition Corp. (VACQ) about a deal that would value the startup at around $4.1 billion, about 5.4 times 2025 expected revenue of $749 million. That includes additional funds of about $470 million in the form of a so-called private investment in public equity (PIPE) from investors including BlackRock Inc. and Neuberger Berman Group LLC.
Whereas the company’s lightweight Electron rocket currently lofts a maximum of about 300 kg to low-Earth orbit, arstechnica reports that the company’s planned Neutron booster will be capable of lifting 8 tons―a mass that is more than 25x greater. This new rocket could make its debut launch as early as 2024.
Spire Global (SPIR) – Summer 2021
On the same day Rocket Lab announced their coming offering, small satellite builder and data specialist Spire Global announced their plans to go public via SPAC, merging with special purpose acquisition company NavSight (NSH). The combined company will have a pro forma enterprise value of $1.6 billion upon transaction close, which is targeted for this summer. That valuation is about 5.4 times 2023 expected revenue of $227 million. Spire will list on the New York Stock Exchange under the ticker SPIR.
Spire’s current constellation of roughly 90 “Lemur” satellites follows the CubeSat model; standardized satellites that are relatively small, box-shaped, and ultra-light to minimize the cost of launch. As MRP noted in 2019, the boxes can be stacked on top of each other to create larger models. Small units like this are usually categorized as nanosatellites (weighing less than 22 pounds), and because they are so compact and cost-efficient, they drastically lower the barriers to entry in the satellite industry.
Spire’s network of satellites is designed to provide customers with a “space-as-a-service” model, allowing them to operate their own payloads, and access data collected via an API their developers can integrate into their own software.
Because Spire manufactures all their nanosatellites in-house, they’re able to offer customization and flexibility to their clients, bringing customer sensors from design to launch-ready within 3 to 6 months.
BlackSky (BKSY) – July 2021
Seattle-based satellite imagery specialist BlackSky announced their merger with Osprey Technology (SFTW) last month. The merger with Osprey will include $450 million in cash ($180 million from PIPE) for BlackSky, and its estimated valuation will be about $1.5 billion. BlackSky will list on the New York Stock Exchange under the ticker BKSY when the deal closes, which is expected in July.
Per BusinessWire, BlackSky’s Artificial Intelligence/Machine Learning powered analytics platform derives unique insights from its constellation as well as a variety of space, IoT, and terrestrial based sensors and data feeds. BlackSky monitors global events and activities providing enhanced situational awareness for commercial and government customers worldwide.
BlackSky has five satellites in orbit right now and plans to deploy 25 more over the next several years with the goal of capturing imagery of anywhere on the planet every 30 minutes.
Astra (ASTR) – Q2 2021
Small launch vehicle developer Astra will go public by merging with Holicity Inc. (HOL), providing the company with nearly $500 million in cash and valuing it at $2.1 billion. According to SpaceNews, $200 million worth of PIPE, led by BlackRock, and $30 million from a concurrent Series C round will go toward completing its manufacturing facilities and investing in automated production capabilities to allow the company to dramatically increase its launch date. In an investor presentation filed with the Securities and Exchange Commission, the company projects launching 300 times in 2025, a total nearly three times the number of orbital launches performed worldwide in 2020.
Astra conducted a mostly successful space launch in December when its Rocket 3.2 launch vehicle launched from the Pacific Spaceport Complex in Kodiak, Alaska. The Motley Fool notes that the test flight was Astra’s third attempt, preceded by one rocket that failed before launch in March (during a fueling test) and a second that was terminated after launch in September when it drifted off course. The third launch reached target altitude of 236 miles, but fell short of reaching orbital velocity.
Astra plans to list on the Nasdaq under the ticker symbol ASTR.
Other Space Industry/SPAC Investment Vehicles
Investors can gain more broad exposure to SPAC offerings via the SPAC and New Issue ETF (SPCX), an actively managed fund that invests only in pre-deal SPACs, and it’s run by Tuttle Tactical Management. SPCX was the first actively-managed SPAC ETF to come to market.
Additionally, the Procure Space ETF (UFO), launched in 2019, offers exposure to the private space industry as a whole. UFO invests at least 80% of its total assets in securities that comprise an underlying index of companies that receive at least half of their revenue or profits from one or more segments of the space industry and has product(s) with an essential purpose in space-based functions. |
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