Along with the demand for expanded connectivity across all parts of the globe, great innovation has occurred by companies spanning start-ups to mature organizations. Governments are pouring billions into the space sector, as are enterprises and individual billionaires. A small group of large GEO satellite providers is now outpaced by numerous companies set up to capitalize on smaller, closer lower orbit LEO satellite technology. These factors, among others, are driving a renewed focus on the space industry. Along with this activity come risks and uncertainties such as costs and malfunctions. Many rockets heading to space fail shortly after launch. It takes a tremendous amount of capital to not only develop cutting-edge technologies but also to execute successful missions.

This perspective explores the space industry, examining SPACs’ impact, the changing landscape of valuations, the growing involvement of private equity (PE) and future market prospects.

Emergence of SPACs

Special purpose acquisition vehicles (SPACs) have been around for decades but have seen a rapid rise in popularity. Given the need to be well capitalized, and the compelling upside if successful, many space companies utilized SPACs starting in 2021.

Recent SPACs

The Evolution of Valuations

The promise of rapid revenue and future profitability growth drove strong valuations out of the gate. However, being public places the expectation for companies to generate returns for shareholders through strong financial performance. In the private markets, where annual results often trump the importance of quarterly results, top or bottom-line misses can better survive scrutiny.

Stock Market Performance of Public Companies from IPO Date¹²

The share price underperformance of some space companies may be a mismatch of financial performance versus timing expectations given the growing competition, the rate of technology advancement and slower-than-expected adoption. However, long-term demand prospects remain bright, these companies are still solving huge challenges and societal goals and the interest in space has not waned.

Companies like SpaceX’s Starlink are bringing the internet to areas of the world that are inaccessible through traditional terrestrial infrastructure. Maxar is providing governments with high-resolution satellite imagery and Rocket Lab is enabling more frequent space launches.

Space-related activity is at an all-time high. That said, the question remains if companies operating in the sector are better suited to access the private markets.