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Satellite veterans alert of the risks of space SPAC

As per two satellite sector veterans, the flurry of activity revolving around SPACs moves the space into a new age of risk-taking. In an exchange with SpaceNews, Iridium Communications Chief executive Matt Desch defined the past decade’s influx of corporate capital into the megaconstellations as well as launch startups as a “tea party” in contrast to what’s going on now.

Over the last 6 months, space companies have been racing to capitalize on growing market interest in SPACs, or special-purpose takeover companies. SPACs, also known as “blank check” firms, brings a major — and reasonably easy — capital infusion to space projects as they are tracked quickly to the financial markets. Astra, Rocket Lab, BlackSky, as well as Spire have both revealed proposals for a SPAC merger since the beginning of the year, earning over $2 billion in full.

“Currently, it seems to be an all-out, mind-bending party,” stated Desch, who took the Iridium public in the year 2009 via the SPAC merger with GHL Acquisition Corporation.  Row 44, a supplier of in-flight connectivity, decided to go public 4 years later after a SPAC merger with the Global Eagle Acquisition. Avio SpA, which is an Italian rocket manufacturer, took a parallel path to financial trading, listing in the year 2017.

With its 2019 merger together with Social Capital Hedosophia, suborbital spaceflight firm Virgin Galactic ignited the latest space SPAC wave. Momentus, which is a space logistics startup, as well as AST & Science, a satellite-to-device specialist, reported SPAC deals in the late 2020.

Between February 2 and March 1, space-centered data ventures Spire as well as BlackSky, as well as launch suppliers Astra and Rocket Lab, both declared SPAC mergers. Virgin Orbit, which is a Virgin Galactic spinoff that is operating on the LauncherOne miniature launch vehicle, is apparently preparing to join the fray. Meanwhile, MDA, which is a Canadian space exploration firm, is preparing to apply for an IPO (initial public offering), the more traditional way to public markets. Although the SPAC frenzy is excellent news for early buyers looking to prosper when these firms go public with the multibillion-dollar valuations, Desch isn’t the only industry veteran who doubts the movement is as good an opportunity for the firms and the sector as a whole.

Mark Dankberg, Chief executive of Viasat, likened the rush of businesses going public with the sky-high valuations amid little to no sales to the dot-com boom at the beginning of the century in a subsequent interview. Dankberg informed SpaceNews, “I think it’s really risky.”

Using SPACs will make much more ambitious five-year sales projections than those using the conventional path to being a public corporation. According to Desch, the comparatively flexible disclosure requirements compared to traditional IPOs help to spark the hype surrounding these firms, who might only be worth tens of millions of dollars today but are expected to be worth a billion dollars by the year 2026.

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