TAMPA, Fla. — Three space firms that went public two years ago are searching for ways to construct credibility with large institutional investors which have began dipping toes into the deflated market.
Launch vehicle and spacecraft developer Rocket Lab, space technology provider Redwire, and Earth remark operator BlackSky began trading shares inside weeks of one another after their 2021 merger with a special purpose acquisition company (SPAC), a financial tool offering a fast-track to stock markets.
Like other space firms that merged with a SPAC, which requires less due diligence than a traditional IPO, their shares have fallen from a $10 listing price as investors pull back from the market.
Shares closed Sept. 14 at $5.26 for Rocket Lab, $4.12 for Redwire, and $1.30 for BlackSky.
Chief financial officers from these firms joined Noel Rimalovski, managing partner at investment bank GH Partners, on a World Satellite Business Week panel in Paris Sept. 12 to debate the market.
Rocket Lab raised $777 million in capital from its SPAC deal to assist fund its latest Neutron medium-class rocket.
Adam Spice, the corporate’s CFO, said throughout the panel that it could have probably only raised as much as $300 million via the normal IPO route.
“We knew that wasn’t going to be enough,” Spice said.
“We also knew there have been going to be downsides of going through … this novel transaction structure” with a SPAC.
While Redwire’s Jonathan Baliff partly attributed the downturn to high rates of interest which have generally drained growth capital, he also pointed to how revenue guarantees made by a lot of these firms have also been unfulfilled.
“But that doesn’t mean these aren’t good investments,” Baliff said. “It just signifies that there’s loads of rethinking [required] from the investor standpoint.”
Spice said post-SPAC space firms are coping with an equity market that’s poorly educated concerning the space industry and the businesses involved.
“You’ve got an incredible, I’d say, bias by retail investors,” he added.
Nonetheless, he said institutional investors are actually increasingly turning their attention to the market.
“I believe they were attempting to time at the underside of the market,” Spice continued, and “we’ll see how accurate they’re.”
In response to Spice, it’s now on space firms to teach the institutional investor community to make sure they’ve the knowledge they should make informed decisions.
“What we will do most is give attention to our internal, give attention to our execution,” BlackSky’s Henry Dubois said, “after which get the story out.”
Ultimately, Dubois said successful firms can be those who can explain to the market how their business models will get them to profitability.
“I believe profitability is where persons are going to start out focusing and honing in on,” he said.
The brand new funding landscape
Rimalovski of GH Partners said investors are actually focusing way more on business fundamentals, track record, and the scale of an organization’s backlog of future revenues.
This implies transactions are taking longer to finish as investors conduct more due diligence than they did two years ago.
“The era of … things are getting worse, please send extra money — that’s over,” he added.
Redwire’s Baliff also highlighted current confusion amongst investors over which firms will survive the downturn and people with business models that work.
Generally, if an organization listed at $10 and is now trading at $5, “you’re form of viewed as a survivor,” he said, “you’re going to make it. When you’re below $1 … it’s teetering on investors with the ability to just provide you with any capital, and between one and five, you understand, it just depends upon the day.”
Baliff said he expects equity funds will opt to carry onto money for the remainder of the yr to see how the market shakes out, after which deploy funds they’ve been sitting on in 2024.