A $750 Million SPAC Injection Puts Rocket Lab in Direct Competition with SpaceX
(Bloomberg) -- “It tasted like crap,” said Peter Beck. “Honestly, it tasted like taking a handful of chemicals and sticking it in your mouth. Terrible.”
The “it” in question was Beck’s black Rocket Lab baseball cap, which he recently pulverized in a blender, poured into a martini glass and then consumed. This unnatural act marked Beck’s attempt at atonement for going back on his word. In the past, the Rocket Lab founder and chief executive officer had vowed that his company would avoid making reusable rockets and avoid making big rockets. Then, on Monday, Beck revealed that Rocket Lab has started making a big, reusable rocket called Neutron, which puts it in direct competition with Elon Musk’s SpaceX.
Along with the new machine, Rocket Lab consummated a deal that will see it go public via a blank check company arrangement with Vector Acquisition Corp. As a result of its merger with Vector, Rocket Lab will end up with $750 million in cash, be valued at $4.1 billion and start trading on the Nasdaq in the second quarter under the ticker symbol RKLB, if the deal closes as expected. Founded in New Zealand, Rocket Lab plans to use the cash to fund a new rocket factory for Neutron in the U.S. and to fly the rocket by 2024.
The commercial space industry has embraced the SPAC, or special purpose acquisition company, model with galactic gusto in recent weeks. Astra, Momentus, Firefly Aerospace and Spire Global are among more than a half-dozen rocket and satellite companies that have either gone public via a SPAC or announced plans to do so. Most of the companies are unproven and looking to tempt investors with hopes and dreams rather than profits at this point, which makes the SPAC model alluring. The companies can raise capital to fund high-risk, expensive efforts on the back of forward-looking statements that stretch all the way to the moon.
In the midst of a global financial fever dream that includes meme stocks, $600,000 GIFs and SPAC-backed spaceplanes, Rocket Lab’s mission seems almost mundane. It has been sending satellites to space on a small rocket dubbed Electron for years from a private spaceport located on New Zealand’s North Island. It and SpaceX are the only “New Space” rocket companies to conduct regular launches and to offer real competition to government-backed rocket makers.
Rocket Lab and SpaceX have so far coexisted peaceably without much head-to-head combat. The Electron rocket was designed to carry about 500 pounds of cargo to orbit for roughly $12 million per launch. Meanwhile, SpaceX’s workhorse — the Falcon 9 — can carry 50,000 pounds to the same orbit for about $60 million. Rocket Lab’s stated goal was to try to launch lots of cheap rockets every three days or so in a bid to open up space to a wave of new customers.
With Neutron, however, Rocket Lab puts itself in much closer competition with SpaceX. The 131-foot-tall rocket should be able to carry about 18,000 pounds to orbit. Like the Falcon 9, it will be reusable and also able to carry humans, according to Beck. Rocket Lab has refused to say how much the launches might cost; it has only drawings of Neutron so far. (The rocket’s likeness to the Falcon 9 caught Musk’s attention. “Looks familiar haha,” Musk tweeted on Monday. “Nonetheless, the right move. Congrats to Rocket Lab.”)
In the edited interview below, Beck talks about his willingness to eat his hat and get into the big, reusable rocket game and how he plans to follow through on the herculean engineering feat of completing this new machine by 2024.
Is this new rocket something you were being coy about previously and had secretly planned, or was it a realization that you came to over time?
I am not so arrogant that I can’t admit when I’m wrong. As market opportunities arise, we are always going to go after them. Small launch was the right place to start, and access to space was the right place to start. But then we moved pretty quickly into satellites, and we have missions to the moon later this year and then Mars and Venus. One of the lovely things about flying a lot is that you learn a lot about what your customers want. The evolution of Neutron was pretty well defined by what we see around us and what we see in the future.
There’s also the chicken and the egg problem with a program of this magnitude. There’s no point in committing the resources to pursuing this if you don’t have the financing available to do it.
Some of the space startup SPAC deals have seen companies with limited to nonexistent track records pull in very large investments. Did you raise enough, given the state of your business and how excitable is the market right now?
I won’t speak for other peoples’ projections. You can draw your own conclusions about those companies. For us, it would be a complete disservice to Rocket Lab to put down numbers and predictions that don’t reflect what we honestly believe we can stand by and deliver. If that results in a lower valuation, so be it. We’ll earn it.
We were on a slow and steady path to do a traditional IPO. But there is a moment in time here — and given that moment in time, why would you not seize the opportunity to get so much more done in such a shorter time frame. If you look at our SPAC and our financials, there is no mining of diamonds on some asteroids or some crazy fictitious thing. That is reflected in our valuation. This is a real company.
You’ve had control over your own rocket factory and your own launch site in New Zealand, where everything could be monitored closely. Now, you’re talking about building a rocket factory in the U.S. and launching from a NASA site. It seems like this next chapter could come with more bureaucracy and baggage.
Yes and no. You have to appreciate that when we started Electron, it was all from scratch. We had to negotiate a bilateral treaty with the U.S. and New Zealand governments, negotiate a whole lot of laws, help formulate a space agency and all the rest of it. If I look back at the hurdles we had to jump over to get Electron done, and all the hurdles we face with Neutron, it is night and day. We’ve got all the scars. We know all the bits that come up and slap you in the face. I’m actually really excited. I’m personally almost liberated that we get to blow away some of the constraints that we’ve had in the past.
Are you going to personally move to the U.S. to oversee this?
I’ll live wherever I’m required to live. I’m not concerned with how effective I can be.
You’re saying 2024 for the new rocket. That would be record time for a rocket of that size.
Maybe for a rocket of that size. With Electron, we raised our first capital in 2014 and had our first test flight by 2017. I appreciate that it’s a smaller vehicle, but we knew nothing. We don’t even have to build a launch site this time. We can reuse about a third of the technology from Electron on the new vehicle. It may be aggressive, but we’ll see.
There’s a curse and a blessing to SPACs. For all practical purposes, you guys were doing fine, and most of your competitors were really struggling coming into this year. Now, a number of your rivals have tons of a cash and a better shot at catching up with you, don’t they?
Capital is just one element. It’s fuel, but fuel without the burner and the oxygen is just fuel. The worst thing you can do to an early stage company is over-capitalize them because they just get lazy and slow. We always run on the smell of an oily rag. That is just the culture here at Rocket Lab.
You’re being pretty cagey about the technical details on the new rocket.
We’re at the beginning of this program. It’s not our style to talk about things until they’re really far down the track. I won’t disappoint you. We have some good stuff coming.
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