Astra Space Given Delisting Warning
Astra stock price drops to all-time low
Barely one year ago Astra Space became the first launch venture to begin trading on the Nasdaq. A couple of fairly well-known Seattle area individuals helped to prop up the transaction via a special purpose acquisition company (SPAC-based) offering that resulted in an initial valuation of more than $2 billion and generated approximately $500 million in cash. The ultimate plan at the time was to have nearly daily launches by 2025.
On September 28, 2022, Astra provided a statement regarding the failed June launch of its 3.3 vehicle carrying NASA (TROPICS) cubesats. Upper stage engine failure was identified as the primary cause and, on the same day, NASA put out a note whereby it seemingly tentatively agreed to utilize Astra’s in-development Rocket 4 for “comparable scientific payloads”. The formerly mentioned vehicle has had a series of issues and has been completely put in moth balls. It was also announced that a new CFO will be joining the company effective in November. All current launches have been suspended and potential commercial flights for next year will “depend on the success of our test flights” per Astra’s CEO. Not to be topped, the current trading price as of today’s date is an anemic $.51, and a deficiency notice was sent to the company by Nasdaq requiring minimum trade level compliance by April 2023. A rather inauspicious start to say the least for a company that had planned to have monthly launches at a minimum two years ago.
– Update: Not long after agreeing to complete the TROPICS satellite launch series Astra pulled out of the agreement completely. Rocket Lab took over the contract for orbital placement of the remaining payload in the queue.
– Update: In late December 2022 a class action suit was filed by Robbins LLP proposing that Astra had violated its duties to shareholders by claiming errant capabilities, proposed launch cadences, and additional items relevant to the filing.
The privately driven small launch market and SPACs
A quick aside regarding SPACs and Astra’s push to achieve funding via this route in rapid fashion. A few thoughts if you will…
“Holicity Shareholders are Starstruck with Astra, But Votes Needed Today to Avoid Delay.” This is a headline from IPO Edge regarding an interview with the CEO and soon to be departed CFO. There are a number of very similar stories to be found via a quick search that convey a similar tone and sense of urgency which is peculiar at best for a venture that is seemingly tracking well and poised for strong growth given newly established relationships and potential books of business.
“Becoming a public company is an important milestone in our mission to improve life on Earth from space,” This quote from the CEO the day after acquiring the ASTR common stock symbol was also fairly interesting given the increased competition in the market and the apparent need to accelerate things on all fronts via a quick infusion of cash obtained by a process that may errantly encourage these type of unifications and public offerings for ventures that simply are not properly seasoned nor organized to do so.
The problem with SPACs
We’ve encountered a number of businesses recently that are either in talks with organizations running a SPAC or in the process of forming a merger. Indeed, a number of space-related companies have taken this path including Terran, Virgin, Planet, and more. Numerous others are currently in discussions to merge or have cancelled and chosen another route – Maritime. These types of investment vehicles have been around since the late 90’s but have recently gained an inordinate amount of popularity. Why?
Groups of generally known investors are able to put together what is essentially a body seeking a host. You simply pay large fees to attorneys, bankers, and other usual suspects involved in the process. This allows you to avoid the traditional IPO route and many of the seemingly bothersome directives involved and then simply find the right private company to assimilate. Profit and move on to the next. Fair enough. Could there be possible inflection points in the process, however, that may often generate less than ideal outcomes given the manner in which SPACs are structured? The answer would be a resounding yes due to the following:
• Named patrons have a two-year window to locate a proper merger company. If they are unable to do so all fees that have been paid out (which are substantial) remain in the hands of the aforementioned attorneys, bankers, and usual suspects. Additionally, all cash fronted by those eager investors must be sent back.
• Conversely, should the amalgam come across a seemingly proper venture to snap up they are allowed to garner a total of 20% of the equity available.
When taking into account these two details alone it seems fairly clear why a proliferation of SPACs currently seen in the market might just lead to a few difficulties. The countdown to find a partner within the set time period creates competition amongst those who invariably will be selecting from a shrinking cadre of possible groups with less experience, quality, and more risk attached. Add to this the retail investors involved – who, by the way, pay far above value due to the various fees attached – and you’ve got a situation ripe for potentially errant decisions.
The overall record for space companies that have gone the SPAC route has not been good up to this point other than movement seen by Rocket Lab and Planet, and even they are currently hovering at the $5 mark. A number of acquisitions have been delayed or entirely cancelled, and the overall tenor seemed to be that this type of arrangement would taper off substantially due to the general lack of success, financial changes on a global basis, or a host of additional factors that may be specifically related to the space vertical.
Not likely.
Given the fact that NASA has kept Astra on the Venture-Class Acquisition of Dedicated and Rideshare (VADR) contract for a presumed Rocket 4 usage, and an additional 11 companies are also eligible to bid, it seems highly unlikely that the foray into space payload ventures by a host of interests will abate. Add to this the plethora of companies who are also seeking to place materials and machines into various orbits and the industry clearly will be highly viable for some time to come from countless perspectives. There are simply too many entities who require these services and plenty of money to toss at companies by organizations under ever increasing obligation to find seemingly auspicious avenues to do so. The primary hope, of course, is that many of these providers will seek to optimize and perfect their services prior to taking on paid work.
