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Satellogic

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-$3.56 -43.95%
Space SPACs and "The Kindness of Strangers"
Warren Buffett stated in the 2008 Berkshire shareholder's letter, "We never want to count on the kindness of strangers in order to meet tomorrow's obligations." Analyzing the potential reliance of firms on the future kindness of strangers can be a good method to gauge resilience as we enter a period where fresh capital will likely be harder to come by. Already, broad-based declines across newly public (ex. $MAXR, which went public in 2009) space companies hints at a lack of enthusiasm for parking capital in more speculative ventures.

So, how likely are these firms to rely on other people's money to drive growth?

Pretty likely. Most firms seem to be in a somewhat precarious situation with little cash available for growth capital. Planet Labs ($PL) is the notable exception; interestingly, of the four companies above, all except Planet remain in the relatively early stages of building out their planned constellations.
(I excluded $MAXR as it is a more mature business with ~$1.7 billion in TTM revenue. Maxar holds $2.2 billion of debt on its books and only $15 million in cash.)

Additionally, as these firms invest in their future, they are burning significant amounts of cash relative to reserves. For such early-stage ventures, it's difficult to assess the return on these investments, but it's worth understanding which firms will likely need to tap capital markets to fund ongoing investments. (Below numbers reflect the most recent quarter's financials.)

From these numbers, $PL stands out as a particularly resilient operator. At the current quarterly cash burn rate, Planet can last 51 quarters without accessing additional capital. The pace of investments will almost certainly ramp up, but it's a useful reference point. In comparison, at current quarterly run rates:
  • Satellogic ($SATL) has enough cash to fund less than one quarter.
  • Terran Orbital ($LLAP) has ~7 quarters.
  • BlackSky ($BKSY) has ~5-6 quarters.

Again, I excluded Maxar due to the different profile of the business, but the company is already highly levered at 8.5x net debt / EBITDA less capex. Under the same analysis, $MAXR would also have less than a quarter of cushion, but it is less relevant as it has historically been cash flow positive on an annual basis.

This is not an exhaustive analysis by any means, but it's interesting to view the difference in financial condition among companies investing to gain share in the same markets.
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Great post on space SPACS. I do own $SPCE... any reason you didn't include it here? (Alas, I'm not sure they'll be around much longer either.) Another area currently seeing a "lack of enthusiasm for parking capital in more speculative ventures" is biotech.
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Did the Space SPAC companies go public too soon?
For many companies that are currently in their R&D phase, why do they go public while they're building out their products, awaiting approval from regulators, etc.?

Is it because private investors aren't interested in remaining patient for a bit longer? Or is it because the founders wanted to capitalize on the high valuation that publicly traded startups are reaping?

During the SPAC boom, many space companies from $SPCE $MNTS $ASTR $SATL etc. all went public while being in their pre-revenue phase. All of them are currently generating losses.

The nature of these infant industries is that they need to take their time to develop a working product before they can start generating profits. And most Wall St. investors aren't fond of waiting for profits to come in. They base their decisions on each quarterly earnings release. If milestones are taking longer to reach, these investors lack patience and they'll sell tons of stock at once and depress the company's valuation. Having a lower valuation makes it more expensive to raise capital. And even if that's the cheapest way of raising capital, diluting existing shareholders will create more problems.

With the SPAC bubble, many startups took advantage of the opportunity being presented to them. Because of this, the founders got a huge windfall, the company is under more scrutiny, and the objectives of these companies have changed. The recent stock market sell-off is one reason why many innovative companies like SpaceX and Stripe choose to stay private. They would prefer to see their valuation endure less volatility and work with investors who have more patience for the products and services that the company is developing.

In the meantime, I'll remain skeptical about the many space companies that have gone public. I wish them the best and hope that they can find ways to raise more capital to facilitate their cash burn. If the stock market continues to decline and interest rates continue to surge, the tight credit markets could be a make-or-break moment for these space companies. Since these companies have a high risk of dilution, I see the huge stock market sell-off not providing much of a margin of safety for investors looking to buy the dip on those space companies.
You’re missing $RKLB off your list. Its share price has suffered a similar fate to other space companies but I’ve still got faith because they actually launch rockets into space regularly and more importantly successfully
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Long $PLTR - A real-world use-case of Edge AI
Palantir's Edge AI is deployed on Satellogic 's - $SATL satellites.

This enables insights within a minute without much delay.

Watch this video from Bloomberg Technology!

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