Astra, rocket startup that has yet to conduct a successful launch, is going public

Astra, rocket startup that has yet to conduct a successful launch, is going public

Astra, a US-based rocket startup aiming to build cheap rockets to haul satellites to space, announced Tuesday that it’s going public via a reverse merger known as SPAC.

The company has yet to begin commercial operations, and though a December test launch of its Rocket 3.2 came very close to entering Earth’s orbit, Astra has not yet conducted a fully successful test launch.

But Holicity (HOL) — a special-purpose acquisition company (SPAC), or a “blank check” investing tool, created by Craig McCaw who made a fortune in the telecom business — is planning to acquire the company.

That means McCaw is placing a multibillion-dollar bet that Astra will make good on its pledge to rapidly build lightweight rockets that can safely launch satellites. If shareholders approve of the proposed merger, the deal could be finalized in the second quarter of 2021, and Astra will begin trading on the NASDAQ under the symbol “ASTR.”

SPACs have become increasingly popular over the past year. With a SPAC, a blank-check firm allows companies to skip the time-consuming and expensive process of raising money through a more traditional initial public offering. Going the SPAC route will also allow Astra to skip many of the financial disclosures required of more traditional IPOs.

Holicity, which was trading around $10 per share Monday, saw its stock price jump to more than $14 a share after the announcement Tuesday.

As part of the deal, Holicity will funnel about $300 million into the company, and a separate pipeline of up to $200 million will be brought in from funds managed by investment giant BlackRock — giving Astra a valuation of more than $2.1 billion when the transaction is complete, according to a press release.

That’s big money for a company that hasn’t yet proven its technology works.

But Astra CEO Chris Kemp said that the company is planning to put its first satellite in orbit by this summer, and he’s confident that mission will go according to plan. The only hangup during the company’s last launch attempt in December, he said, was a fuel mixture that was slightly off.

After launching this summer, Kemp said Astra plans to “move into monthly launches towards the end of the year, and, as we as we get into next year, we’re going to be ramping up to the weekly, bi-weekly, and then — ultimately — daily launches in 2025 is our target.”

Going public — and being subject to all the scrutiny and short-term profit pressures that such a move entails — also won’t affect the company’s “risk tolerance,” he said.

“We don’t expect every rocket launch to be successful, and moving forward we’ll tell our investors that,” Kemp said. “If we’re not seeing rockets fail from time to time, we’re not pushing the team part enough to innovate.”

Astra’s move to go public closely resembles Virgin Galactic (SPCE), the suborbital space tourism startup founded by billionaire Richard Branson, which went public via SPAC in 2019.

Galactic is not yet commercially operational either, though the company said it could fly its first customers on a high-altitude joyride later this year.

Galactic, however, became the first so-called “New Space” company — young companies mostly funded by billionaire CEOs or Silicon Valley investors that are looking to upend the traditional US spaceflight industry with a wide range of new rocket and satellite technologies — to go public. Galactic’s stock has taken wild hikes and dives over the past year as Wall Street has grappled with how to adequately value a company with a non-traditional business model.

Galactic was also a previous target of r/WallStreetBets, the Reddit forum that became infamous last week for triggering a surge in Gamestop’s share price to spoil hedge fund bets. Bloomberg reported a year ago that the forum was part of the reason Galactic’s shares shot up more than 200% despite there being little-to-no significant activity by the company at the time.

Nevertheless, traditional Wall Street analysts see a bright future for Galactic and the broader space economy. Top financial institutions, from Goldman Sachs to Morgan Stanley, predict it will grow to $1 trillion or more over the next two decades.

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