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Ad Astra Per SPAC: An Entrepreneur’s Shot at the Moon

astra launchWith increasing discourse on climate change and overpopulation, some individuals have taken it onto themselves to find a solution outside of this world, and investors are looking to take both their portfolios and humanity past the stratosphere

Space travel has, for most of its history, been confined to government agencies and national programs. Until the advent of SpaceX, private space flight for commercial and industrial use seemed like a pipe dream. But with successful launches, entrepreneurs began developing means for private space campaigns; one such visionary is Chris Kemp, the founder and CEO of Astra.

For starters, what is Astra? 

Astra is a private space vehicle company founded in 2016 that produces small rockets that take satellites to space. Their vision, however, is very much like that of SpaceX and Blue Origin: innovating and streamlining space tech to make a commercial flight for humans, and potential space colonies, a realization. 

Now, like many disruptive tech companies as of late, Astra is not seeking to jump through hoops for an IPO. Astra certainly seeks to go public, but has chosen to do so via a SPAC; in early February, Astra announced that they’ve landed a merger with Holicity (NASDAQ:$HOL). The deal values Astra at $2.1 billion and is ready to be sealed in the second quarter of 2021.

The news itself sent Holicity’s stock price surging 51%, a parabolic movement that would be fittingly described as the stock having gone “to the moon,” but such big shifts raise perhaps two of the most central questions that investors have: is this price justified, and why?

For starters, it’s key to remember that stocks are tied to company financials; something that retail investors sometimes forget is that releasing stock is a means for companies to raise capital. Keeping that in mind, investors’ initial very bullish reaction to the Astra and Holicity deal that set Astra at a $2.1 billion valuation was largely in part due to said valuation; while the stock price has certainly moved from that point, the first big jolt in the price was meant to match Astra’s valuation.

But what about its price now? 

This leaves much more room for interpretation, as it has moved substantially in both directions since its jumps in early February. But there are signs that this stock leans toward the bullish end of the spectrum.

First is that on the announcement of the merger, Astra’s already public competitors took major dents to their stock prices. Companies like Virgin Galactic had their shares slump upon the announcement of the Astra/Holicity merger even despite positive news on said companies. 

Of course, these stocks didn’t sink too low, but it’s key to note that investors see such a young firm as respectable competition in the space race; sure, it’s a niche industry, to begin with so any competition is substantial, but that still means that Astra is in a niche industry and brings with it a substantial competition.

The second is that it’s not just investors that recognize Astra’s worth. NASA has awarded two contracts to Astra in almost as many months. In December, Astra was awarded a $3.9 million contract as one of only three firms selected for these awards, which for Astra is dedicated to a specific NASA launch project in 2022.

astra launchRocket 3.2, launched in December 2020; this was Astra’s first successful launch into orbit

But, most recently, Astra was awarded another contract from NASA just over a month ago. On February 26th, NASA gifted Astra with a $7.95 million contract, with the purpose of helping NASA launch a satellite constellation into space throughout 2022. Double the amount of the December contract, this award stands not only by itself as a symbol of NASA’s satisfaction with Astra’s capabilities, but also a double vote of confidence from the world’s most recognized space agency.

These two contracts seem to be well-deserved; on December 15, 2020, Astra’s Rocket 3.2 successfully entered orbit. The significance of this can be felt through Astra’s subsequent tweet where they called this a “HUGE SUCCESS!!!!!!!”

It seems like Astra has resolved issues that plagued their past launches, and has made progress from every attempt. The two aforementioned contracts certainly corroborate this; they signal repeated votes of confidence from NASA and signal even faster growth from the young company with this additional funding.

“The plan is fully funded to 2025 to get to daily space delivery.” – Chris Kemp, CEO of Astra

So what does Astra’s future look like?

Astra’s CEO Chris Kemp has many big plans. Comparing his approach to Amazon’s marketing strategy, Kemp explains that Astra can be considered a “space platform,” a means of helping consumers “put stuff in space quickly,” much like how Amazon marketed themselves as a platform rather than “a delivery truck company or a warehouse company.”

And like his analogical counterpart Jeff Bezos, Kemp understands the necessity of speed. Kemp plans to fast-track Astra’s growth to begin “daily space delivery” by 2025, a timeline that may mirror Elon Musk’s idealistic & intensive management style more so than Bezos’s. 

But, there’s a reason not many companies support such intense deadlines. The number one reason? Well, it’s hard and takes a lot of work to meet them. Ken Herbert of Canaccord Genuity remarks that “nobody’s ever done it,” and questions if a lone company can manage such a schedule in 4 years.

But, when you’re dealing with going into space and taking steps towards fulfilling sci-fi dreams, it makes sense to shoot for the moon. Maybe a CEO like Kemp is exactly what private space companies need to fulfill any out-of-this-world goal. 

“It doesn’t mean it’s impossible, but everything’s got to go right” – Ken Herbert, analyst at Canaccord Genuity

Astra, under its current ticker $HOL, looks poised to make long strides in what many call the Space Race 2.0. Given that Kemp’s ambition mirrors Elon Musk’s, the CEO of the largest commercial satellite operator and of the most revolutionary outer-space company, Astra may very well catch up to SpaceX in the long run. NASA could certainly back this possibility as they’ve already bet about $12 million on Astra’s abilities. But, as Ken Herbert says, it is quite ambitious. Chris Kemp is going to have to keep his wits about him on this flight since, as they say, anything can go wrong in space. 

Christopher Koh
Christopher Koh

Christopher is a current 3rd year student at UCLA, pursuing a Bachelor’s in Economics and Political Science, and is seeking a career in buy-side finance. He works as an analyst for Internet Bull Report at UCLA, is the Director of Investments for the Business Law & Investing Society, and also worked as an investment banking analyst for Genz & Associates. Christopher’s passions include stocks, martial arts, and philosophy, and he spends most of his free time reading, cooking, and doing due diligence for his own stock portfolio.

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