As 2020 draws to a close, it’s important to recognize how incredibly notable this year has been when looking at the amount of activity in the capital markets for the space industry. Not only have there been sustained and very significant capital flows, for example, SpaceX’s $2 billion equity raise in the third quarter, but there have also been many acquisitions and mergers. The fact that these activities have occurred with the backdrop of Covid-19’s impact is remarkable and would seem to indicate even more activity lies ahead as the global economy looks to recover in 2021.
Capital Flows
According to reports released by leading information service providers including SpaceFund, Bryce Technology and Quilty Analytics, 2020 has once again shown year-over-year (y-o-y) growth in capital flows into the space sector. This is astounding, given that the global economy was more or less shut down for the second quarter and has had persistent Covid related headwinds for the majority of the year.
In addition to the total amount of capital the industry has attracted, several new investors have also emerged, including consolidators such as private equity and holding companies. This is important as it should increase the stability and resiliency of capital sources for the industry. This diverse set of capital providers should bode well for the industry as we look to next year.
Acquisitions and Exits
In addition to large capital flows, 2020 can rightly be seen as “the year of the exits” for the space industry. As has been predicted for many years, the industry was in need of consolidation. Typical aggregators such as large companies with significant market share, so called “strategics” were very active in 2020. Significant transactions included Raytheon’s acquisition of Blue Canyon and Ansys’ acquisition of Analytical Graphics for an eye-popping $700 million.
In addition to strategics, we saw significant traction with private equity firms. Redwire, a company formed by private equity company AE Industrial Partners came out of nowhere to acquire several companies, including Deep Space Systems, Roccor and NewSpace darling Made in Space.
Holdings companies also emerged in 2020 as a more significant theme. Previously, Noosphere Ventures had acquired Firefly Aerospace and Bradford Space had acquired Deep Space Industries. New to the scene in 2020 was the previously mentioned Voyager Space Holdings which acquired Altius Space Machines and Pioneer Astronautics.
Voyager Space Holdings’ innovative concept focuses on supporting the growth needs of commercial space companies by offering an alternative solution to traditional private capital models and replacing them with a longer-term approach as a provider of permanent capital.
Since the company’s inception, Voyager has already acquired two companies with plans to add even more to its portfolio through the end of the year and into 2021. The company’s capital support allows these already established companies to focus their efforts on advancing mission capabilities to continue their growth in the space exploration industry.
What can we expect for exits in 2021? Clearly, as long as capital remains available and relatively inexpensive, acquisition activity is likely to remain high. The expectation is that at least a dozen or more significant acquisitions will be cemented into place, likely with many announced in the early part of the year.
Public Companies
2020 was also a year of additional public company activity, the ultimate destination for exits in any industry. Virgin Galactic’s stock continued to do well despite the firm’s challenging financials and a start-up, Momentus Space, was also caught up in the SPAC wave and should go public in early 2021. Given that both of these companies are essentially low revenue or pre-revenue, it is likely to portend for more public company activity for space in 2021, especially as consolidated companies reach scale and significant profitability.
Looking Ahead
All in all, the space capital markets had an extremely bullish year. Even in a year thwarted by a global pandemic, deep global recession and an uncertain future global economy.
While we can’t anticipate what’s to come next with Covid-19, we can recognize that the space industry is resilient and that, even in dire times, we can persevere and continue the advancement of space exploration.
To further prove this point, the global space economy is expected to grow from $350 billion currently to over $1 trillion by 2040 (Morgan Stanley). This growth can not only be attributed to the rise in interest in public space companies but also due to the rise in demand for space data and the proliferation of innovative satellite technologies that will ultimately change how the space industry operates.
Given all of this, it is hard to argue that the industry’s best days aren’t ahead of it. The future of global commercial space appears to be extremely bright and the journey should be quite an entertaining one to follow.
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Author Dylan Taylor is a noted investor, CEO, philanthropist and thought leader. He serves as Chairman & CEO of Voyager Space Holdings, a multi-national space exploration company based in Denver. He has been citied by CNN, Harvard University, CNBC, the BBC, and others as having played a seminal role in the formation of the NewSpace industry. Full bio available at www.dylantaylor.org