SPACInsider contributor Eric Weidemann this week compiled his three favorite potential SPAC targets among space enterprises. We look at why they are compelling and why each could be a fit for a blank-check merger.
We’ve now had four SPAC combinations with space ventures in the past two and a half years. And, while the total addressable market (TAM) for servicing the cosmos is smaller than automotive in the near term and the sector still well behind in pure deal count, the market reaction to announced deals in the sector has been just as ecstatic.
In fact, the SPACs that have either completed or announced transactions with space targets since (and including) Virgin Galactic’s close in October 2019 opened trading yesterday at an average price of $28.37. Meanwhile, the 27 SPAC deals in the past year in the announced or completed stage with automotive technology companies opened Thursday at an average price of $21.38.
Some caveats here: the automotive number is pulled up by QuantumScape (NYSE:QS) at $50.10 and down by ACE Convergence’s (NASDAQ:ACEV) freshly announced deal at $11.23. Meanwhile, if you take Virgin Galactic (NYSE:SPCE) out of the space picture and allow the three space deals announced in the past five months (SRAC, NPA and HOL) to stand on their own, this results in an average of $18.83 at Thursday’s open.
Nonetheless, these cohorts are close, but thus far electric vehicles (EV) have gotten the majority of the chatter as the SPAC sector. That could change if SPAC teams begin to think the EV target field is thinning out and decide that outer space is going to be their own final frontier.
As the EV wave deepened, certain commonalities in the development timelines began emerging that supported the logic of most deals. While the R&D path for a new electric car has a long tail, a trigger point has consistently been that once an autotech target inked a strategic relationship with a major carmarker or got its first big concrete orders for units, a SPAC deal followed closely behind.
A similar legitimizing milestone seemed to trigger SPAC deals for space ventures Momentus and Astra around their launches. Stable Road (NASDAQ:SRAC) announced its combination agreement with “space trucking” venture Momentus two months out from its first flight up on a SpaceX Falcon-9. Meanwhile, commercial rocket developer Astra entered into its deal with Holicity (NASDAQ:HOL) two months after the company successfully reached space with its rocket design in December.
Rocket Lab has already zoomed past this threshold, having put 97 satellites into orbit to date with its first commercial mission in 2018 and notching six missions in 2020. It made its first satellite deliveries to space of 2021 on January 20. For them, the trigger for SPAC cash could come in connection with its ambitions far beyond low Earth orbit.
The company plans to look for life on “the most underrated planet in our solar system” Venus with a mission set to launch in 2023. The company has already built a stable business model of delivering satellites to space, and even showed resiliency following a launch failure last July.
This wreck resulted in the loss of seven satellites, but Rocket Lab quickly identified the cause of the malfunction and was cleared by the FAA to launch again four weeks later. As such, its business model in the Earth’s neighborhood appears relatively de-risked already, but it will need cash to reach its more distant targets.
Rocket Lab has raised $215 million in outside funding to date and was valued at $1 billion to $10 billion in its last raise in 2018 according to PrivCo. But, wherever it fell in that range at the time, it has likely gotten pricier with many more successful launches in its cap since.
The SPAC market has shown no shortage of appetite for funds willing to participate in PIPEs, so trust value may not be a limiting factor for teams looking to approach Rocket Lab. Nonetheless, it would mark a fascinating statement for the sector if one of the larger SPACs with big institutional sponsors got involved in the hunt, such as Thoma Bravo Advantage (NYSE:TBA) with $1 billion in trust, CC Neuberger II (NYSE:PRPB) with $828 million raised at IPO or Apollo Strategic (NYSE:APSG) with $816.8 million.
With so much stuff heading into space – Astra predicts demand for 38,000 new satellites through 2029 – someone has to deal with all of the old junk clogging up orbit.
Astroscale is positioning itself to be the space-age trash collector with solutions for de-orbiting obsolete equipment and debris. It is also on the precipice of its potentially legitimizing launch, with the orbital debut of its first craft in March.
It has its work cut out for it. The European Space Agency currently tracks over 28,000 objects in orbit and estimates the total mass of debris around Earth at 9,200 tons. This has resulted in about 550 collisions or explosions that have caused further fragmentation with even more bits of shrapnel whipping around the planet.
Beyond merely clearing space for new objects, Astroscale also acquired Effective Space Solutions last year which specializes in extending the life of larger geostationary satellites.
It has raised $204.2 million to date, including a $51 million Series E in October, according to Crunchbase. While its current valuation is uncertain, it appears to be about the right size for any of the four SPACs that have declared a focus on aerospace, defense or aviation, with IPO proceeds ranging from $163.8 million in the case of Genesis Park (NYSE:GNPK) to the $218.4 million raised by Pine Island (NYSE:PIPP).
Another SPAC to follow in this space is New Vista (NASDAQ:NVSAU), which has filed for an IPO but has not yet listed. It is led by former Boeing CEO Dennis A. Muilenburg and has staked out aerospace, defense and logistics as its hunting grond.
The challenge in the coming decades is also not just to make satellites more numerous, but better. One of the cosmic ambitions of the next decade is a space-based broadband system, and Kymeta already has among the best transmitters for communicating beyond the ozone.
Kymeta has developed a flat panel antenna that can provide data throughput of over 45Mbps while requiring relatively low power resources of under 150 watts. This comes as a hybrid cellular-satellite broadband service, which currently relies on geostationary systems, but could be expanded with smaller low-orbit satellites.
The company currently has about 100 clients across 40 countries in defense, public safety and industries that require unbroken communications across undeveloped areas like railroads and shipping. Its latest models have been on the market since November.
It has so far out-raised both Astroscale and Rocket Labs with $332.8 million in total outside equity funding since 2012. This includes a strategic investment in December from Hanwha, a Korean smart-technology company with a significant book of business in defense.
This connection could be the signal flare for SPACs looking at the space that Kymeta is ready for the public boost. Its applications for telecoms and autonomous vehicles of all sizes also open it to an even broader range of SPACs hunting in those spaces.