Financial pain of new place, death warrant or opportunity?

The new space, supposed to reshape the space landscape, continues to be battered by a financial storm where gusts are linked together at a higher frequency than anticipated technological revolutions.

For nearly a decade, we can’t talk about space without mentioning the new space, whose success doesn’t always match the buzz that accompanies the many announcements of nothing more than the return of “good-fast.” Cheap”, which I’ve mentioned several times on this blog and had its heyday (and fall) at the turn of the last century.

The problem with the new space is that it is mainly operated by start-ups whose financing needs can only be covered by the famous SPAC, (small) companies specialized in the provision of funds and among which I “scratched” this approach in a post published in January 2021 “Acquisition frenzy : huge beautiful”. It appears that these SPACs are starting to find that the return on investment is delayed for a long time, a situation that I mentioned in a post published in December 2021 ” Will the new space be a new bubble financial source? », and which has really developed since then. did not

Fall in the stock market

In the July 27 issue of Aviation Week, editor-in-chief Michael Bruno made a disturbing observation: Shares of companies backed by SPACs have suffered impressive losses for 4 consecutive months. Some damage stats that speak volumes: Astra – 60% (I’ll come back to that later), BlackSky – 46%, Mynaric – 33%, Redwire – 40%, Rocket Lab – 62%, Satellogic – 41%, Spire Global – 56%, Telesat – 42%, Terran Orbital – 50% and Virgin Galactic – 50%.

The contrast between the media hype carried by all these companies that are now interested in space news and the reality of their accounts is well known to all. Michael Bruno writes about the ability to deliver as promised: “Demonstrating the ability to execute is going to be critical”. He previously sounded the alarm with an article titled “Falling Stars: Space SPACs Will Return to Earth in 2022” in the Jan. 10 issue of Aviation Week. In the January 2022 SpaceNews review, space analyst Jeff Foust, in his article “Space SPACs look to rebound in 2022”, however, expressed hope, with reservations, of an increase in the shares of the mentioned companies this year. Desperate?

Deterioration of condition

The Astra launcher is one of the best illustrations of these startups’ disasters: on June 13, a 2nd stage engine failure prevented NASA’s 2 CubeSats from going into orbit (which fell back into the ocean); It was the 8th failure out of 10 launches. Bad business for Astra (and for the SPAC Holicity with which it merged in July 2021), especially since the company plans to build a more powerful launcher and ensure annual rates of 300 to establish profitability. Resilience or recklessness?

Another instructive example is the first demonstration of Momentus’ Vigoride space tug (whose share price fell by 60% at the start of 2022) launched at the end of May, and which failed in June: Vigoride among the ten picosatellites to be brought into their final orbits.[1]Due to errors in the definition of frequencies of telecommunication equipment and in particular the non-isolation of solar generators, only two locations were possible to deploy.

Towards new mergers?

These failures will not facilitate the indefinite pursuit of funds: after all, how many failures did Elon Musk suffer with his first launcher before achieving his success with SpaceX? But he was able to show patience, which is not the case with SPACs whose objective remains short-term profits and who easily forget that a new technology cannot be developed at the snap of a finger. Economic assumptions.

(again) Jeff Foust last February and Michael Bruno last May The probable and plausible consequences: triggering a wave of mergers and acquisitions, which is justified in terms of capitalist logic, but in this case, goodbye to the new space consciousness, and welcome back to the old space (which yet acquired in more than half a century some fine letters of nobility).

So will these financial difficulties in the new space lead to its loss or recovery? Will tell in the near future. Meanwhile, from the path of roses predicted for the emergence of new spaces, companies seem to see only thorns for the moment…

[1] What SpaceX’s Falcon 9 launcher can’t do is bring its entire payload into a specific orbit: ensuring that it’s placed in the correct orbit depends on each component of the payload, which requires the use of Vigoride-type tugs, many of which are different. Developments include companies that have “sniffed out” a potentially “juicy” market.

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