Investing in the private space industry is being revolutionized this year as numerous space-based startups are getting in on the SPAC boom. Virgin Orbit, sister company of space tourism firm Virgin Galactic, was the latest company to announce their SPAC ambitions, putting them on a growing list of satellite and rocket manufacturers that will be tapping PIPE cash and public offerings later this year.
MRP has curated a shortlist of space-based SPAC offerings coming later this year, along with some background on why SPACs have become such a phenomenon throughout industries focused on frontier technologies.
Related ETFs and Stocks: Virgin Galactic Holdings, Inc. (SPCE), Collaborative Investment Series Trust – The SPAC and NEW Issue ETF (SPCX), Procure Space ETF (UFO), Vector Acquisition Corporation (VACQ), NavSight Holdings, Inc. (NSH), Osprey Technology Acquisition Corp. (SFTW), Holicity Inc. (HOL)
Last week, it was announced that Virgin Orbit, a satellite launch startup and sister company of Virgin Galactic (SPCE), will be the latest spacefaring company to go public through a merger with a special purpose acquisition company (SPAC).
Virgin Orbit has hired Credit Suisse Group AG and LionTree LLC, and is shopping for a SPAC merger partner that could take it public with a value ranging from $2.5 billion to over $3 billion, according to sources cited by the Wall Street Journal.
The SPAC route is one that Virgin Group, which maintains an 80% ownership stake in Virgin Orbit, has traveled before, having used a blank-check company to take its space-tourism business Virgin Galactic Holdings Inc. public in 2019.
Virgin Galactic, a firm focused on space tourism, definitely set the tone for many SPACs to follow. Since its merger with Social Capital Hedosophia in October 2019, valuing the company at $1.5 billion, Virgin Galactic’s share price has nearly tripled. Though the company has been racked by numerous delays for years, the company believes that, at scale, it will do about $1 billion in annual revenue per spaceport. Per InvestorSpace, that equates to about 10 spaceships, doing about 5 flights per months, with 6 paying passengers on each flight, and an average ticket price of around $300,000. Virgin Galactic plans to have two of those spaceports operational by 2030.
Based on those lofty forecasts and lack of peers to compare such a business model to, it is easy to see why traditional IPO investors may have a hard time valuing spacefaring companies with small streams of revenue. In a SPAC offering, a target company can disclose management’s forward-looking projections prior to the completion of the offering, which can help justify more expensive valuations.
Additionally, SPAC offerings provide a more favorable capital structure for companies that are operating on narrow budgets. As GigCapital writes, SPAC entity sponsors typically pay a 2% underwriting fee at the time of the SPAC offering, with an additional 3.5% underwriting fee (i.e. based on the SPAC IPO size) paid by combined company at the completion of merger. By comparison, the traditional IPO fees are typically 7% of the proceeds raised through the IPO process.
Though we are still awaiting the first traditional space IPO, Quartz reports that seven SPACs have already made deals to bring space firms public at a cumulative value of more than $20 billion. This method of financing is especially appealing to satellite, analytics, and rocket startups operating in the space industry because…