Forward-looking projections in the SPAC market

[ringsider]

Has anybody else been looking at some of the SPAC slide decks for proposed mergers?

The Astra projections of 300 launches annually by 2025 caught some attention:-



But some of the SPACs in the satellite comms market merit some attention too.

ArQit, for example, which is merging with Centricus Acquisition Corp, has produced an interesting slide deck.

The footnotes on some of the slides are worth a read:



And the forecast profit margins are quite attractive:-



AST Space Mobile (which merged with New Providence Acquisition already and trades as $ASTS) also made some quite dramatic forecasts about profits:



Hard to know what to make of these projections.

[Scintillant]

These should be viewed as absolute best case scenarios where the company in question magically becomes the new SpaceX. More aggressive projections typically leads to more money raised, so it's clear why the SPACs make these statements.

SPACs are in a bit of a grey area at the moment when it comes to forward looking statements. Typically during an IPO you're expected to not make misleading statements or overtly unrealistic projections. With SPACs, the argument goes that due to the way the SPAC is structured, they're exempt from that restriction and can make more forward-looking statements and have rosier projections. The SEC doesn't necessarily agree with this provision (see https://www.sec.gov/news/public-statement/spacs-ipos-liability-risk-under-securities-laws) and there's legislation moving through Congress to close this SPAC "safe harbor" loophole (see https://www.bakerbotts.com/thought-leadership/publications/2021/june/spac-update-congress-proposal-to-eliminate-forwardlooking-statement-safe-harbor-for-spacs). Until that passes, you should take those projections with a few kilos of salt.

[TrevorMonty]

The safer bet are companies with current revenue stream and customer base. They may and probably won't hit forecast sales but will still be viable business. The startups that are yet to be operational are riskier investment.

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[edzieba]

The safer bet are companies with current revenue stream and customer base. They may and probably won't hit forecast sales but will still be viable business. The startups that are yet to be operational are riskier investment.

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Established companies with stable revenue and an existing customer base would not go for a SPAC reverse-acquisition. The drawbacks (a very large proportion of potential IPO income lost, terms that usually result in founders losing control, etc) are not worth it and an standard IPO is achievable and more attractive. SPACs target startups who would not hope to be able to perform an IPO yet but for whom as low as 50% of a big cash lump sum is preferable to 0%.

[TrevorMonty]

The safer bet are companies with current revenue stream and customer base. They may and probably won't hit forecast sales but will still be viable business. The startups that are yet to be operational are riskier investment.

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Established companies with stable revenue and an existing customer base would not go for a SPAC reverse-acquisition. The drawbacks (a very large proportion of potential IPO income lost, terms that usually result in founders losing control, etc) are not worth it and an standard IPO is achievable and more attractive. SPACs target startups who would not hope to be able to perform an IPO yet but for whom as low as 50% of a big cash lump sum is preferable to 0%.

Blacksky, Redwire, Rocket Lab and Planet all have good customer base and steady revenue stream. They are well past being startups. Redwire is little different as its group of startups bought by investment fund.

Astra and Momentus are real startups. Neither is flying operational HW with paying customers onboard. They've yet to complete succesful maiden mission.



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[leovinus]

These should be viewed as absolute best case scenarios where the company in question magically becomes the new SpaceX. More aggressive projections typically leads to more money raised, so it's clear why the SPACs make these statements.

SPACs are in a bit of a grey area at the moment when it comes to forward looking statements. Typically during an IPO you're expected to not make misleading statements or overtly unrealistic projections. With SPACs, the argument goes that due to the way the SPAC is structured, they're exempt from that restriction and can make more forward-looking statements and have rosier projections. The SEC doesn't necessarily agree with this provision (see https://www.sec.gov/news/public-statement/spacs-ipos-liability-risk-under-securities-laws) and there's legislation moving through Congress to close this SPAC "safe harbor" loophole (see https://www.bakerbotts.com/thought-leadership/publications/2021/june/spac-update-congress-proposal-to-eliminate-forwardlooking-statement-safe-harbor-for-spacs). Until that passes, you should take those projections with a few kilos of salt.

In my opinion, SPACs are the return of CDSs and CDOs which were a big factor in the credit crisis of 2008. While the market would and will argue that it is nice to make illiquid assets liquid and tradable, the lack of regulation resulted in mostly speculation and bad pricing and took down several big banks. Everybody wants to be rich To my tired eyes, the SPAC is "yet another vehicle" to speculate without the necessary oversight. Feel free to insert other speculation vehicles like Bitcoin or tulips here. Buyer beware!

[Tywin]

Where do you find the investor paper of Arqit?

[Tywin]

The safer bet are companies with current revenue stream and customer base. They may and probably won't hit forecast sales but will still be viable business. The startups that are yet to be operational are riskier investment.

Sent from my SM-G570Y using Tapatalk

Established companies with stable revenue and an existing customer base would not go for a SPAC reverse-acquisition. The drawbacks (a very large proportion of potential IPO income lost, terms that usually result in founders losing control, etc) are not worth it and an standard IPO is achievable and more attractive. SPACs target startups who would not hope to be able to perform an IPO yet but for whom as low as 50% of a big cash lump sum is preferable to 0%.

Blacksky, Redwire, Rocket Lab and Planet all have good customer base and steady revenue stream. They are well past being startups. Redwire is little different as its group of startups bought by investment fund.

Astra and Momentus are real startups. Neither is flying operational HW with paying customers onboard. They've yet to complete succesful maiden mission.



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Satellogic and Spire have a good base of clients too...

[ringsider]

Where do you find the investor paper of Arqit?

https://sec.report/Document/0001104659-21-064806/tm2115858d1_ex99-3.pdf

[Danderman]

Any new SPACs on the horizon?

[jstrotha0975]

Any new SPACs on the horizon?

Redwire and Virgin Orbit look good.

[Asteroza]

Any new SPACs on the horizon?

Redwire and Virgin Orbit look good.

Redwire is particularly interesting, if you are into the Moneyball amalgam thesis...

[TrevorMonty]

Any new SPACs on the horizon?

Redwire and Virgin Orbit look good.

Redwire has most potential but its long term investment ie 10-20yrs. VO is just another launch company at present with small niche market, not sure of their long term plans.

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[jstrotha0975]

Any new SPACs on the horizon?

Redwire and Virgin Orbit look good.

Redwire has most potential but its long term investment ie 10-20yrs. VO is just another launch company at present with small niche market, not sure of their long term plans.

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VO is planning to make a bigger launch vehicle that launches from the top of a 747.

[FutureSpaceTourist]

Less than 2 years on from the first post in this thread, Virgin Orbit went bust, Astra is struggling and:

https://twitter.com/wapodavenport/status/1663724562029182979

Executives and early investors in companies that went public via SPACs sold shares worth $22 billion through well-timed trades, profiting before share prices collapsed wsj.com/articles/compa… via @WSJ

https://www.wsj.com/articles/company-insiders-made-billions-before-spac-bust-4607a869

From the article:

Some of the big­gest win­ners were De­troit Pis­tons owner Tom Gores’s in­vest­ment firm Plat­inum Eq­uity, British bil­lion­aire Richard Bran­son and con­victed Nikola founder Trevor Mil­ton. They were among many in­sid­ers who got shares on the cheap and sold them as they rose in value, ac­cord­ing to a Wall Street Jour­nal analy­sis of in­sider-trad­ing dis­clo­sures as­so­ci­ated with more than 200 com­pa­nies that did SPAC deals.

[Danderman]

Are there any space companies that went the SPAC route that aren't struggling today?

[edzieba]

Are there any space companies that went the SPAC route that aren't struggling today?

Rocketlab, Planet Labs, Terran Orbital, Redwire, AST Spacemobile, all seem to be doing reasonably well.
In terms of pure launch companies, yes, it does not seem to be going so well for them.

[Tywin]

Are there any space companies that went the SPAC route that aren't struggling today?

Rocketlab, Planet Labs, Terran Orbital, Redwire, AST Spacemobile, all seem to be doing reasonably well.
In terms of pure launch companies, yes, it does not seem to be going so well for them.

I would add, Sidus Space, than when launch, LizzieSat, will grow a lot...

And BlackSky...