Dear readers,
Welcome to Quartz’s newsletter on the economic possibilities of the extraterrestrial sphere. Please forward widely, and let me know what you think. This week: The end of space SPACs, NASA fuels the SLS, and Saudi astronauts.
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It’s autumn for SPACs, the blank-check companies that helped hundreds of private companies go public in recent years. The pace of dealmaking is slowing in a bear market for stocks. And yet it still might be the best time to be a retail investor interested in extraterrestrial equities.
The boom kicked off with investor Chamath Palihapitiya’s deal to bring Virgin Galactic onto public markets in 2020. Now, the space tourism company’s shares trade for just $5, compared to a bubblicious peak of more than $50. But Palihapitiya and his backers have made out just fine, earning more than $750 million from a series of SPAC deals in various sectors. This week, he announced he would close his remaining blank-check firms and return their money to investors because no promising acquisitions could be found.
That’s why I wonder if Intuitive Machines, a company focused on the emerging lunar economy that announced a merger with a blank-check firm this week, will be the last space SPAC.
“The space market has been beaten up...the SPAC market was frothy [with companies] coming out with big valuations that they are paying the price for today,” Intuitive Machines CEO and co-founder Steve Altemus says. “We came out with a responsible deal, valued the company based on real revenue and real backlog.”
That’s a fair point: The deal values Intuitive Machines at about $1 billion, based on $102 million in revenue expected this year. Compare that to Virgin’s 2019 offering, which valued the deal at $1.2 billion against forecast earnings of $30 million the next year (which never materialized.) Another company, Rocket Lab, went public through a SPAC acquisition in 2021 with a valuation of $4.1 billion, on 2020 revenues of $35 million.
Today, Rocket Lab is valued at $2.4 billion by investors, but to its credit it met its forecast for revenue in 2021 and is on track to do the same this year. It’s an example that for all the SPAC horror stories, there were some companies that saw free-flowing public capital as an accelerator, not a last resort as private funding dried up.
At yesterday’s investor day, Rocket Lab executives presented a litany of accomplishments and plans. It aims to launch more rockets in 2022—as many as nine—than in any previous year, and will inaugurate a new launchpad in Virginia. Its acquisition of space component and software makers is paying off, with almost $400 million in backlog orders. And it is designing and building a new, more reusable rocket called Neutron that will allow it to compete with bigger launch vehicles.
Rocket Lab, in other words, went from a company with one small rocket to a vertically integrated space company, building spacecraft and their components as well as launching satellites and deep space scientific probes.
Intuitive Machines has its own plans to grow from a firm that will transport payloads to the Moon’s surface into a company that operates a suite of services there, from navigation and communications to nuclear power plants. Executives expect the government will continue to foster commerce in space.
“We see consistency when it comes to space and the strategic importance of the Moon,” Altemus, the Intuitive Machines CEO, says. “Sustainable human presence on the Moon is here to stay. I could bet the company on it, that’s how stable the policy has been.”
A year after the space SPAC boom, the tide has gone out. Despite a bear market that the Federal Reserve continues to encourage, companies like Rocket Lab and soon, Intuitive Machines, give public investors access to the space economy they didn’t have just years ago. Assuming, of course, they didn’t get burned on the way down.
And with all this, the private markets haven’t given up on novel space companies yet. SpinLaunch, which uses a mass accelerator to hurl spacecraft into orbit without a booster rocket, just raised $71 million from venture investors.
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IMAGERY INTERLUDE
Here’s SpaceX’s Super Heavy rocket booster on the way to the launch pad on Cape Canaveral earlier this summer. This week, it ignited seven Raptor engines in a static fire demonstration.
SpaceX will need all 33 of the booster’s engines to carry its Starship into orbit. Musk says that demonstration could take place in the next few weeks.
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SPACE DEBRIS
Axiom Space to fly Saudi astronauts. The Houston company will carry two astronauts from Saudi Arabia to the International Space Station onboard a SpaceX Dragon capsule, reports Reuters’ Joey Roulette. The two passengers would fly on Axiom’s second private mission to the International Space Station, expected in the first half of 2023. In other geopolitical human spaceflight news, a US astronaut flew to the ISS onboard a Russian Soyuz rocket yesterday, despite ongoing tensions between Moscow and Washington.
NASA fuels the SLS. Ground crews at NASA’s Kennedy Space Center fully fueled the Space Launch System rocket and conducted an engine chilldown test despite yet another leak of liquid hydrogen fuel. After two scrubbed launch attempts and four unfinished dress rehearsals, the space agency is aiming to launch its uncrewed Artemis 1 test mission to the Moon as soon as Sept. 27.
Lynk is licensed. The race to get mobile phones connected to satellite constellations continues with the news that Lynk has received a license from the Federal Communications Commission to do just that. Lynk has developed the technology for unmodified mobile phones to work with its satellites, and says it will bring it into service before the end of this year, but didn’t disclose where or with whom. Among other efforts, Apple’s newest iPhone will connect with satellites for emergency messaging, and SpaceX has plans to link T-Mobile phones with its Starlink network.
Musk mulls Iranian Starlink. The SpaceX founder told a Twitter user he will seek to provide Starlink internet service in Iran as protests against its autocratic government swell, but technical and political challenges will make this a harder job than plugging in Ukraine. The US Treasury, at least, doesn’t mind.
Space radar business model throwdown! The average conference panel is boring, but last week two executives in the space radar business, Capella CEO Payam Banazadeh and Umbra VP Joe Morrison, got real about their contrasting models for growth. The debate over winning the current market for this data (read: governments) and expanding it isn’t as binary as depicted, but please write in with your thoughts on the path forward for these companies.
Get ready for DART. Another deep space mission with big implications back home on Earth will climax on Sept. 26 when the DART (Double Asteroid Redirect Test) spacecraft impacts an asteroid 7 million miles (11 million kilometers) away in an effort to figure out how humans could stop dangerous asteroids from crashing into our planet.
Space Force song? Space Force song.
Your pal,
Tim
This was issue 151 of our newsletter. Hope your week is out of this world! Please send your space investing strategies, your own lyrics about the Space Force, tips, and informed opinions to tim@qz.com.