Space SPACs: Uncertainty surrounds the mega-IPOs of the future
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Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX, and satellite spinoff Starlink, have been pegged by analysts to be the mega-IPOs of the future for several years.
While they are not yet focused on developing off-planet energy options, unlike Rolls-Royce – the global launch market is expected to grow increasingly tight with Russia’s Soyuz rockets shunned by the Western stage.
“Given the macroeconomic conditions in the market, investors are being more cautious,” CEO of London-listed Seraphim Space Fund, Mark Boggett, told Morning Wire “Companies that are more mature, with better predictability of revenues and profits will be better placed to go public… the market conditions for 2022 would favour larger players such as Starlink and Blue Origin.”
Blue Origin has flown 15 test flights since 2015, with all being a success apart from an emergency landing on the booster on its first launch, Maxim Manturov, head of investment advice at Freedom Finance Europe, noted.
“If Blue Origin continues to conduct more successful tester flights, then an IPO launch could very well happen in the near future,” said Manturov.
However, Susannah Streeter, senior investments and markets analyst at Hargreaves Lansdown, told City A.M. that a float from Jeff Bezos’ space venture could be a way off yet – despite its founder’s “deep pockets”.
“There has been speculation surrounding a possible IPO of Blue Origin, although Jeff Bezos has not confirmed that this is part of his grand plan… So, although the rumour mill may keep whispering, there is little prospect for investors to buy a slice of the venture any time soon,” she said.
SpaceX and Starlink have become increasingly exciting prospects for investors.
SpaceX’s progress in growing the commercial space ecosystem, with a new alliance with NASA, could see the space heavyweight fetch between an $80bn (£64bn) and $100bn (£80bn) valuation.
Musk, currently the richest man in the world, said he wanted to take Starlink public in February 2020, and again in June 2021.
However, the billionaire tech entrepreneur has been “kept busy” in swooning after social media platform Twitter under a controversial $44bn (£35.2bn) takeover in recent weeks.
“Until that deal is either done or taken off the table, it’s unlikely we’ll see any imminent progress towards a Starlink IPO,” added Streeter.
SpaceX has also been fielding concerns from the likes of the European Space Agency and Chinese authorities about the space debris, safety and emissions surrounding the huge number of satellites it plans to send into orbit.
Manturov seems to think that “if all goes well financially, Starlink will go public”, but others say the natural unpredictability of the industry paired with a spiralling macroeconomic environment has muddied the water for big space IPOs.
“Investor tolerance to risk is falling in 2022,” Francesca Gregory, associate analyst at GlobalData told Morning Wire, as rising interest rates, inflationary pressure, a supply chain crisis and the war in Ukraine spook shareholders.
“Therefore, despite Blue Origin’s recent successful missions, the question of an IPO remains uncertain as the current climate will undoubtedly act as a barrier to the companies trying to take this step,” she added.
Virgin Galactic’s performance as one of the largest listed space companies may also leave a bad taste in investors mouths, having had its share price tumble more than 53 per cent in the year to date, amid subdued activity since its gilded launch last year.
If space firms were to go public, space SPACs have been a go-to for many, including Richard Branson’s Virgin Galactic in 2019 and Virgin Orbit in January.
SPAC listings have also been a good option for smaller players in the past, such as Rocket Lab and Astra Space.
However, Gregory cautioned that SPAC mergers have “shown signs of falling out of favour over the course of last year”, amid regulatory scrutiny surrounding so-called ‘safe space’ – as space debris threatens pricy tech in orbit and Earth’s geopolitical tensions rise upward.
“IPO contenders in the emerging space economy will need to be confident in their cash flows to clear the financial and regulatory hurdles of going public,” she explained. “Uncertainty in the wider market environment will hamper the prospect of a space company IPO in the short term,