Space SPAC Wave Seen Having Largely Crested
The slew of space-related special-purpose acquisition company transactions has slowed to a trickle and isn't likely to pick back up soon, space investment experts told us. Some space companies remain bullish on SPACs as the best route to an initial public offering, Qulty Analytics analyst Caleb Henry said, citing Intuitive Machines, which in September announced a SPAC deal. The space infrastructure company said it expects to go public in Q1 2023.
One big damper on space SPAC activity is the overall economy, with rising interest rates and concerns about recession and inflation leading to increased cautiousness by the investment community, said Andrew Penn, senior director in consultancy Avascent's space and satellite communications practice. The SEC proposing enhanced SPAC disclosures and investor protection early this year also made SPACs somewhat less desirable as a route for a space company to go public, Penn said.
Space also might have lost some luster with a portion of the investment community, Penn said. Space companies are capital intensive and can take a long time to start generating sizable returns. Many investors went into space SPACs based on company financial projections, and in most cases those companies "wildly underperformed" and those projections turned out to be "extremely optimistic," he said.
The stock of Rocket Lab, which went public in August 2021, peaked at $18.69 that September. The past week it has been trading at less than $4.60. Profitability will come once most of its R&D spending for its Neutron two-stage launch vehicle, intended for the satellite mega constellation market, is done, Chief Financial Officer Adam Spice told analysts earlier this month. "While most of the elements of our business have been ramping well, we're still in the early stages of our Neutron development and investments," he said. The stock of earth observation satellite operator BlackSky, which went public in September 2021, dropped quickly from more than $11.50 to spending much of this year in and around $2 a share. Its next-generation constellation is on track, with the first launch to be in late 2023, CEO Brian O'Toole told investors earlier this month.
AST SpaceMobile, which began trading in April 2021, has been buoyed by a particularly large fanbase, Qulty's Henry said. Its stock has bounced the past year from under $5 to more than $14. It has spent much of the past week between $6.50 and $7.
Penn said private equity remains a big investor in space deals. He said venture capital money has slowed somewhat due to the economy but it still remains a big investor in space.
SPACs have a natural deadline of two years to do an acquisition that takes a purchased company public or face liquidation, and SPACs coming up against that deadline might still look to space options, said Quilty's Henry.