Investment

Space, SPACs, and why the final frontier as an investment opportunity is fraying

As Amazon founder Jeff Bezos prepares to fly to the edge of space, wealthy individuals from various backgrounds are seeking their own rewards from the sector in their own way.

Some are happy with a quick profit from SPAC mergers dedicated to space. Others are committed to a longer haul. Either way, their determination to go forth remains intact, despite this year’s regulatory moves against SPACs leading to delays in listings, higher costs, accounting issues, lower prices and legal class actions from disappointed investors. 

3D printed components to build a reusable rocket is looking more likely…but does it have wings?

An explosion in space, and lost lives, would lead to more lasting collateral damage. Space junk, extreme operational challenges and growing space power rivalry are also lurking in the dark, ready to trap the unwary. Anyone interested in opportunities in the sector should bear in mind that the risks faced by investors are as challenging, as they are complex. And it is hard to imagine banks being as generous with their loans as investors in the current age of zero interest rates. 

Right now, however, risk factors are being drowned out by the 20/20 vision of our space billionaires – not least Bezos who has been pumping $1 billion a year into Blue Orchid to compete with Elon Musk’s SpaceX.

Some say deals in the sector will make it worth trillions.  They believe extracting returns from piles of investment capital on earth will be easier than mining minerals on the moon. Capital is also spreading further: the cost of launching a satellite has fallen by a factor of 100x over the last ten years.

The vision thing has helped Craig McCaw’s Holicity SPAC defy a 48% post-February drop in its share price thanks to an upbeat approach from its new partner Astra, a satellite launch business that has reinforced the deal with a string of deals and hires. It looks likely to complete the deal soon. Geospatial data provider BlackSky is on track to finalise its February merger with the Cohen family’s Osprey Technology in the third quarter. 

The planned merger of Ed Freedman’s SPAC with Momentus space cargo group has been postponed due to US security concerns concerning its Russian founder.  But shareholders have voted to keep the deal alive, at least until September. Even here, it seems, hope trumps adversity.

Liquidity is receiving an extra boost via investments by corporates and institutions. Ark Invest has launched a space ETF for retail investors and UK-based adviser Seraphim Capital is launching a space investment trust by buying seed investments from Seraphim’s venture capital business.

Seraphim has spotted an opportunity to advise the UK government in its attempt to get serious about space. Comms specialist Will Whitehorn, former president of Virgin Galactic, is designated chairman of its trust, after advising the UK billionaire Sir Richard Branson for years.

Seraphim has also been involved in SPAC deals. 

One of them, Arqit, has confirmed plans to raise finance through a merger with Centricus Acquisition Corporation, a listed SPAC, which puts a value of $1.4 billion on the group. It plans to use Virgin Orbit to launch low-orbit satellites whose encryption technology is designed to protect communications from cyber-hacks, even when, in theory, a hack happens to be led by a quantum computer.

The initiative is backed by the nascent UK Space Agency, with the first launch from Cornwall planned in 2023. 

Apart from Virgin, a key investor is Heritage Group, whose billionaire chairman Manfredi Lefebvre d’Ovidio of Monaco chairs Centricus, whose merger with Arqit is planned for completion in the third quarter. 

Lefebrve d’Ovidio is best known for building up shipping group Silversea and selling two-thirds of it to Royal Caribbean for $1 billion in 2018. Heritage is a travel-orientated private equity firm owned by his family trust, whose investments include travel group, Abercrombie & Kent 

He wants to stay on the Arquit board to “hyperscale” the business also supported by the European Space Agency, BT and Sumitomo. Rival space communications group OneWeb, previously rescued by the UK government, raised $550 million from France’s Eutelsat in April.  

Spire Group operates a constellation of nanosatellites that provide weather and tracking data to the National Oceanic and Atmospheric Administration. It has agreed to merge with a SPAC called NavSight backed by Tiger Global and billionaire Barry Sternlicht’s family office Jaws Estates Capital. Ian Osborne’s Hedosophia was backer to the SPAC which merged with Virgin Galactic in 2019. 

NavSight is led by tech veteran Bob Coleman, who developed Six3 Systems and sold it to CACI International for $820 million in 2013. 

Another space specialist, AST Space Mobile, has just secured its Nasdaq listing after merging with a SPAC called New Providence Acquisition. It is developing a space-based mobile phone service, backed by Vodafone, which can deliver satellite signals to phones without using a mast. 

New Providence’s chief executive was Gary P. Smith, who has driven a series of acquisitions at soft drinks group Big Red, backed by Wall Street and Keurig Dr Pepper.

Elsewhere, Redwire, a space and aerospace company with 3D Printing capabilities, has confirmed plans for a $645 million merger with listed SPAC Genesis Park Acquisition. Redwire is backed by AE Industrial Partners and Genesis’ chairman is David Siegel, adviser to Apollo Global Advisors, who made his early money from airlines and travel. 

Providing components through 3D Printing is becoming a popular idea. Early exponent Relativity Space raised $650 million in June from investors like Jared Leto, Spencer Ragoff, Brad Buss and Mark Cuban, plus institutions such as Fidelity and Baillie Gifford. It raised a separate $500 million early this year and plans to use 3D Printed components to build a reusable rocket to rival SpaceX and Blue Orchid.

We can all dream.

 

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