In October 2019, Richard Branson’s Virgin Galactic completed its merger with Chamath Palihapitiya’s first SPAC, $IPOA. $SPCE was a fast success among retail investors, rising over 200% in the months after its come-to-market moment. In many ways, Virgin Galactic was the SPAC that tee’d off the SPAC rush on markets, inspiring scores of copy-cat investment companies to spin up their own SPACs. It arguably started another trend on markets that has only recently become visible. For the last few years, space exploration has been a hot topic among private investors. The launch of $SPCE represented the beginning of space travel’s (slow) incursion into public markets.
That drawn-out push might be getting a kick in the boot thanks to everybody’s favorite money manager, Cathie Wood. In early January, a securities filing with the SEC showed that Wood’s ARK Invest planned to launch a new ARK ETF called $ARKX, the ARK Space Exploration ETF. In the weeks since then, several space and satellite companies have come to market in SPACs, and they’re likely to carry some weight in Cathie’s new fund.
Understanding the Space Industry
Space has long been a field consolidated by a handful of large players, pitching for paydays in the form of government contracts and commercial satellite launch deals. Historically, this has meant that nearly every defense contract, NASA mission or commercial satellite launch was done by Arianespace, United Launch Alliance (which is owned by Boeing and Lockheed Martin) or another defense contractor.
However, with the rise of new-age players like SpaceX, the traditional economics of space travel have been disrupted by reusable spacecraft. Given that the competition for big launch contracts is still very real, old players are repositioning and a handful of new ones are jumping in. Northrop Grumman paid over $9 billion to acquire rocket company Orbital ATK in 2018, seeking to capitalize on its government contracts. Jeff Bezos’ stepped aside at Amazon in 2021, in part to focus on his moonshot space flight company Blue Origin (and probably because he’s tired of losing to Elon Musk).
There’s one other huge factor fueling this gold rush for rocket companies: the growth of a more niche, small satellite market. As the name implies, these satellites are smaller than big defense payloads or NASA missions. The “small-sat” market primarily serves academic institutions, small companies, cube sats and other players which have historically hitched a ride as secondary payloads on bigger missions. However, being a “secondary payload” translated to limited options or versatility for orbits. In order to offer more versatility and options to the market, a handful of companies are focusing on the small-sat market.
Two of the biggest players in this new small-sat marketplace are Astra and Rocket Lab. Both have announced mergers with SPACs in light of the obvious retail interest in space travel (and inevitably, the pop that will come with Cathie Wood buying up their stock). On Feb. 27, both companies scored multi-million dollar government launch contracts.
Rocket company Astra announced on Feb. 2 it would merge with the Holicity SPAC to become the “first publicly traded space launch company on the NASDAQ.” Unlike bigger rocket players, Astra wants to focus on making launches hyper-affordable. Their 40-foot-tall two-stage rocket can carry 165-450 pound payloads to orbit for just $3 million per launch. Perhaps even more impressive, the rocket can be set up in a few days by just a half dozen people. And the company has ambitions to bring that cost even lower.
The company has booked over $150 million of contracted launch revenue, according to the merger press release. Among that revenue is a nearly $8 million deal awarded by NASA for their TROPICS mission. After a handful of test launch attempts, Astra had their first successful launch in December 2020. In light of the success, the company plans to launch its first satellite mission in early 2021. The company’s rocket will serve as the primary delivery vehicle.
In addition to the $800 million ascertained from cash proceeds and Holicity’s balance sheets, the company received a private PIPE investment from BlackRock. The deal values Astra at $2 billion. Once the deal closes, the company will settle into its new ticker, $ASTR.
Rocket Lab ($VACQ)
In March 2021, Rocket Lab announced it would go public through the Vector Acquisition SPAC. Unlike Astra, Rocket Lab has already minted its prominence in the small-sat market. At the time of the SPAC announcement, Rocket Lab had launched 97 satellites for governments and private companies on 16 separate missions. It makes Rocket Lab’s 56-foot-tall Electron spacecraft, which can deliver 331-496 pound payloads to orbit for just $8 million per launch, “the second most frequently launched U.S. orbital rocket.”
Rocket Lab’s existing steady income has the company confident it will be generating “positive cash flows in 2024.” After all, they’re making enough money from rocket launches to build their own satellites. The company plans to use the proceeds generated from the SPAC to build a new rocket. The Neutron looks and feels like a smaller plagiarism of SpaceX’s Falcon 9. The 131-foot-tall rocket will boast a reusable first stage and be capable of delivering a whopping 8,000 kilograms of payload to Low Earth Orbit (LEO). This is many multiples more powerful than their Electron spacecraft and also opens the door for human space flight.
Neutron might empower Rocket Lab, already the biggest provider of small-sat launches in the marketplace, to make a competitive offering for players who might have otherwise gone with ULA and SpaceX. But we’ll have to wait until 2024 when Neutron launches to see for sure.
In the meantime, Rocket Lab will be working on sending orbital payloads to the moon for NASA’s Artemis program and building its own satellite to send to Venus and Mars for other organizations. The company will be valued at over $4 billion and will list as $RKLB.