By Rahul Mepani, Athean Myat, Suchritha Patlolla, Sung Cho, Kevin Hwang, Josh Figueoroa (Cornell University) and Aman Singla, Kritika and Varshika (NYU).
Overview of the deal
Acquirer: Rocket Lab
Target: Vector SPAC (backed by Vector Capital)
Implied Equity Value: $4.1 bn
Closed date: June 30 2021
Proposed ticker symbol: RKLB
Morgan Stanley & Co. will be advising Rocket Lab
Deutche Bank Securities will be advising Vector Capital
Rocket Lab, an American-based aerospace manufacturer, announced on March 1, 2021 a merger with Vector Acquisition Corp in efforts to go public through a SPAC. The Vector SPAC raised $300 million in its initial public offering back in September. In joining the latest trend of the past two years, the company will be valued at $4.1 billion including debt and the combined cash the companies will pool in is estimated to be about $750 million. Current RKLB shareholders will hold 82% of the company’s equity upon the merger. Rocket Lab’s entry into the public market is expected to better tackle the fierce competition from Elon Musk’s SpaceX and Richard Branson’s Virgin Orbit LLC as it raises money to continue its satellite expeditions.
"Rocket Lab is a once-in-a-generation company that is democratising access to space through its constant innovation, leading technology and proven execution," - Alex Slusky, Vector CEO
Company Details: (Acquirer - Rocket Lab)
Rocket Lab has launched 97 satellites with affiliations in the public and private sector and is one of the biggest competitors for SpaceX and Virgin Orbit LLC in the Space systems & Applications space. Through merging with Vector, the funding raised will help the startup launch a new vehicle, Neutron, that can serve human missions in space rather than just observational satellite launching. It has been collaborating with NASA extensively for its Gateway project to take humans to the moon and back.
With 16 orbital launches since its founding, Rocket Lab has the second most frequently launched rocket in the US behind SpaceX. Its flagship rocket is Electron, a small rocket that launches satellites and is the only reusable rocket of its size, saving production and launch costs. Additionally, Rocket Lab has an extensive network of production and launch facilities across the US and New Zealand. As a result, Rocket Lab’s products are 90% vertically integrated and are able to produce, reuse, and launch rockets into orbit with little external support.
Founded in: June 2006
Headquarters: Long Beach, CA
Founder & CEO: Peter Beck
Number of employees: 422
Valuation Step-up: 1.16x
Post Valuation: $1.41B (as of Nov 2018)
Total Raised to Date: $727.31M
Past Financing Details: $470.00M (PIPE | March 2021)
Company Details: (Target - Kymab)
Vector Acquisition is a blank check company formed by PE firm Vector Capital targeting the tech industry. It raised $300M by offering 30 million units at $10 in an initial public offering in September 2020. Each unit consisted of one share of common stock and one-third of a warrant, exercisable at $11.50. The SPAC went public to leverage the management team’s expertise in tech to target technology and tech-services sectors.
Founded in: 2020
Headquarters: San Francisco, CA
CEO: Alex Slusky
Number of employees: 40
Market Cap: $0.431B
"This milestone accelerates Rocket Lab's ability to unlock the full potential of space through our launch and spacecraft platforms and catalyses our ambition to create a new multi-billion-dollar business vertical in space applications.” - Peter Beck, CEO of Rocket Lab
Consequences & Upsides
Upon an expected fruitful merger, Rocket Lab projects that their EBITDA will become positive by 2023 and can generate a positive cashflow by next year because of the capital raised from going public. In going public, the company can continue its innovation by funding the Neutron launch which is expected to have the potential to lift most satellite forecasts to launch, and present itself as a low cost alternative to larger vehicles. Developing such a vehicle requires significant amounts of capital. Given the SPAC craze going on in the markets, Rocket Lab felt that it would be a faster and smoother process to merge with a SPAC so that they could accelerate development of their Neutron program.
In going public, the company can gain more traction compared to competitor SpaceX as it will launch a unique vehicle that none of its competitors have crafted. The proceeds can also help enhance organic and inorganic growth, with the former being through simply larger sales and consumer interest from the launch of Neutron and the latter through the managerial assistance the company can get from Vector Corp.
Rocket Lab is also going public to help support acquisition of smaller companies. They had previously acquired Sinclair Interplanetary, a manufacturer of smaller space components. They found the acquisition process challenging due to their status as a private company. Going public will help Rocket Lab catalyse their growth as they look to build a multi-billion dollar business through vertical integration.
Risks and Uncertainties
In the past few months, several space companies including Momentus, BlackSky, and AST Space Mobile released statements on their plans to merge with SPACs. With the SPAC trend on its high, it is evident that many space companies plan on riding its wave and reaping benefits through raising capital in an easier route as compared to the expensive traditional IPO route. However, with more space companies merging with SPACs, Rocket Lab can see an increase in competition as smaller competitors like AST Space Mobile will also harbor more funding that can lead to innovation on their end. With space companies charging ahead on its innovation, Rocket Lab potentially faces a relatively concentrated market with fierce competition.