Space race: on second day of huge gains, Rocket Lab passes Virgin Galactic

Credit: Original article can be found here

Blast off: Rocket Lab shares are up 52 per cent over the past two days. Photo / File

A second day of huge gains has seen Rocket Lab eclipse publically-listed space rivals Virgin Galactic and Astra.

That’s good news for at least 1000 more New Zealanders who climbed aboard the listing over the past week.

In late Nasdaq trading, Rocket Lab shares were up a dizzying 23.3 per cent to US$14.32, giving the Kiwi-American company a market cap of US$7.1 billion and valuing founder Peter Beck’s stake at around US$973b ($1.3b).

After their initial failure to launch last week, with the stock listing at US$11.50 on August 25, then falling as low as US$9.50, Rocket Lab’s shares are now up 52 per cent over the past two days.

Rocket Lab’s big gain today was even more notable because small satellite launch rival Astra was in the red for most of the session, and recently trading flat for a market cap of US$2.6b, while Virgin Galactic had dived 7.5 per cent for a market value of US6.1b.

That means Rocket Lab is now king of publically-listed, pure-play space transportation stocks, even if it still trails Elon Musk’s privately-held SpaceX – with a private equity valuation of some US$74b – is still worth the most by some margin.

Beck said earlier that he would not be hitting refresh on Nasdaq.com. “I’m not even watching it,” he said. “At the end of the day, we’re in this for the long term.”

But around 7000 New Zealanders invested in Rocket Lab’s IPO via platforms including Hatch, Sharesies and Stake, possibly are keeping a closer eye on their investment.

And the surge over the past two days has been good news for around 3000 Hatch customers, who collectively held $7.8m in Rocket Lab stock at the start of the session, Hatch co-founder and GM Kristen Lunman told the Herald this morning.

Interest has increased. Around 2000 Hatch customers held Rocket Lab shares (via investing in SPAC company Vector Acquisitions, the vehicle for its reverse listing) as it hit the Nasdaq last week.

Today’s surge is also potentially good news for Sir Stephen Tindall’s K1W1, ACC’s investment arm and early Rocket Lab backer Mark Rocket, all of whom had holdings somewhere below the 5 per cent threshold as Rocket Lab listed on the Nasdaq (none have so far commented on whether they have sold any of their stock).

And it’s also a boon for more than 100 past and present Rocket Lab staff who had been granted share bonuses worth more than $1m at last Thursday’s listing price (which the stock is now above), and more than 180 granted stock now worth more than $500,000.

Reasons for blastoff

Why the surge over the past two days?

Investors – including at least 1000 more Kiwis who have hitched a ride over the past week, since Rocket Lab first listed August 25 – have reacted positively to Rocket Lab announcing it will expand its spacecraft production, and a spectacular failed launch by Astra.

Rocket Lab also got favourable press in an extended analysis piece in the Wall Street Journal, which said, “Shooting rich people into space gets all the press, but investors probably should pay closer attention to the more humdrum business of launching small satellites.”

“Rocket Lab is the safest bet,” the Journal wrote.

The influential business paper noted that looking at each company’s projected earnings in 2025, Rocket Lab was, today, a far cheaper stock than the more glamourous Virgin Galactic.

The paper also noted that Astra earlier this week failed in its third attempt to reach orbit (and it failed in very spectacular fashion, see video below).

Astra’s latest failure, and Virgin Orbit’s inability to move beyond test flights, underlined that while there are dozens of space transportation startups, only SpaceX and Rocket Lab have managed to get a commercial private launch service off the ground (Virgin Orbit is the small satellite-focussed sister company of Virgin Galactic. It has so far staged two test flight, releasing a smaller craft taking to high altitude by a 747).

Expanding satellite production

Talking to the Herald yesterday, Lunman put Rocket Lab’s rise down to an announcement that the firm is expand its space systems division.

That is, making parts for satellites and its own Photon spacecraft.

Rocket Lab's new manufacturing facility in Auckland, due to be opened in the fourth quarter, will produce reaction wheels - a key satellite component. Photo / Supplied
Rocket Lab’s new manufacturing facility in Auckland, due to be opened in the fourth quarter, will produce reaction wheels – a key satellite component. Photo / Supplied

Beck said construction is underway on a new plant in Auckland, due to open in the fourth quarter. It will manufacture 2000 reaction wheels per year – critical attitude and stability control systems on satellites.

Rocket Lab has leased space in buildings immediately adjacent to its existing mission control and assembly plant in Mt Wellington.

An artist's impression of the Rocket Lab Photon spacecraft that will ferry a Nasa micrp-sat into lunar orbit later this year. Image / Supplied
An artist’s impression of the Rocket Lab Photon spacecraft that will ferry a Nasa micrp-sat into lunar orbit later this year. Image / Supplied

Although Rocket Lab bought Canada’s Sinclair Interplanetary to boost its house-brand satellite business, “They’re reliant on all these really micro, unique engineering companies to deliver the value chain of components for a satellite, which can be expensive and time-consuming; they often are these bespoke manufacturing outfits.”

By expanding its in-house satellite manufacturing operation, Rocket Lab was becoming closer to Beck’s vision to move be end-to-end space transportation company.

“They will own more of the value chain,” Lunman said.

“It’s also about speed and scale, given they’re in a space race situation with the likes of Elon Musk and others.”

Peter Beck with Rocket Lab staff during a Nasdaq opening bell ceremony last Thursday NZT. A video message was pre-recorded due to pandemic travel restrictions. Photo / Supplied
Peter Beck with Rocket Lab staff during a Nasdaq opening bell ceremony last Thursday NZT. A video message was pre-recorded due to pandemic travel restrictions. Photo / Supplied

She added, “Many who are still sitting on the sidelines who want to see these companies move aggressively. Anything that solves for speed, and scale with space is seen as a good thing at this point.”

Lunman said the satellite component manufacturing news had sparked a lot of positive comments in investor chatrooms, as well as coverage on high-profile US technology investment site TechCrunch.

Stake CEO Matt Leibowitz said, “We saw trade volume on Rocket Lab rise 92 per cent on the back of the news it was investing in new factories.

“The activity has been driven by news that suggests Rocket Lab is gearing up for significant growth. While Rocket Lab may never utilise the full capacity of its new factory, the fact that it’s investing in having this capacity for growth in the long term has investors really pumped.”

Earlier, Beck told the Herald that the net US$740m raised with the Nasdaq listing would go to developing the much larger, crew-capable Neutron rocket, scheduled for its first launch in 2024, and expanding his company’s space systems division, which it forecasts will account for 40 per cent of revenue by FY2027.

Beck said some of the space system growth could come via acquisitions. By FY2027, the currently loss-making Rocket Lab forecasts operating earnings of US$505m on US$1.57b revenue

While space systems have so far only accounted for a tiny fraction of Rocket Lab’s revenue, it has three marquee interplanetary missions on the way. Later this year, a Rocket Lab Photon will ferry a Nasa satellite into lunar orbit. A privately funded mission will see a Photon sent to Venus in 2023. And Rocket Lab has won a Nasa contract to design and build two Photons that will go into orbit around Mars in 2024 to study the Red Planet’s atmosphere.