Diving SPACs Are a Warning for Aerospace Startups

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Virgin Orbit’s weak start in the stock market should be related to speculative ventures with large valuations and little solid prospects

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On Friday, Mr. Branson virtually attended the opening bell for the Nasdaq debut of his other space venture, Virgin Orbit.,

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Which was run by Chief Executive Dan Hart. Shares closed up 24% since the completion of the SPAC merger on December 30, but are still down 12%.

In fact, nearly all of the most recent SPAC-ed aerospace startups have taken a beating in the past three months, with shares in Virgin Galactic down 46% and shares of Archer and Joby down 43% and 31%, respectively. Is.

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Broadly speaking, the market cap of these futuristic moonshots has flown in lockstep with cryptocurrencies and “meme stocks” launching toward the moon in the first half of 2021 and then deflating them. As the year drew to a close, investors became more savvy: They bought shares of SPAC that had fallen near or below their confidence values, which ensured a near-return while maintaining the skeptical outlook of ex-SPAC ventures.

This should be a warning to aerospace startups coming with galactic valuations. The latest is Eve, the EVTOL subsidiary of Brazilian aircraft maker Embraer.,

which two weeks ago announced a SPAC deal that would give it a valuation of $2.9 billion—Embraer’s own market capitalization is only $3.1 billion. To be sure, Eve already has a $5 billion preorder, but it will be fighting with myriad competitors for a market that pales in comparison to the $1 trillion potential size some analysts see. Close to the story.

In contrast, small-satellite launchers are a promising entry point into an already growing space economy. Rocket Lab remains fairly valuable, but it has taken a lead in them and stands as a rare ex-SPAC with more conservative official estimates than its analysts. On the other end of the spectrum, Virgin Orbit’s valuation is now the cheapest among high-profile aerospace startups relative to expected earnings by 2026 and has likely fallen below Astra, which struggled with several failed launches last year.

Despite Friday’s rally, Virgin Orbit still looks unfairly discredited compared to its brother Virgin Galactic, which isn’t expected by Wall Street to generate any operating income over the next five years: it’s close to break-even next year. Coming up and making a big profit in 2024. It has already put 19 satellites into orbit, and its clever use of a Boeing 747 jet as a mobile rocket platform gives any government with geopolitical concerns the ability to deploy satellites from its own airspace. does.

However, despite expected to lift Of $383 million from its SPAC supporters in August, it only managed to grab up to $68 million. With some additional funding by Mr. Branson and private placements already committed by large corporations such as Boeing, the final gross proceeds added up to $228 million – barely above the minimum cash requirements of the merger agreement.

The fact that ex-SPAC Aerospace stocks trade indiscriminately can provide opportunities for adventurous investors. But it is also a reminder of the larger role that fickle spirit will play in the fate of these speculative ventures.

Write John Sindreu [email protected] . Feather

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