(Bloomberg) -- The next chapter of “SPACs in Space” has been written.
Astra, a maker of small rockets used to send satellites into orbit, plans to reveal Tuesday an agreement to go public by merging with Holicity Inc., a special purpose acquisition company run by telecommunications legend and billionaire Craig McCaw. The deal will value Astra at $2.1 billion and let the company tap into $300 million raised by Holicity, along with another $200 million from funds managed by BlackRock Inc. If the deal closes as expected in the second quarter, Astra will trade under the ticker symbol ASTR on the Nasdaq exchange, the companies said.
Founded in 2016 by Chris Kemp and Adam London, Astra has been manufacturing a line of small, relatively cheap rockets at its factory in Alameda, California. The company quickly built its first test rockets but later ran into problems with its initial launch attempts—some of which ended in fiery explosions.
In December, Astra’s Rocket 3.2 had a successful launch from a spaceport in Alaska where the machine performed well for several minutes but narrowly missed reaching its target orbit in space. According to Kemp, Astra’s chief executive officer, some minor tweaks should solve the issue and allow Astra to fly again this summer. The goal is to begin monthly rocket launches through the latter half of the year. “We have demonstrated our ability to reach orbit, and now it’s about putting capital into the business to build out our factory and bring in some of the best talent,” Kemp said.
In the private space arena, Elon Musk’s Space Exploration Technologies Corp. is the dominant maker of large rockets designed to carry thousands of pounds of satellites into orbit at a cost of roughly $60 million per launch. Meanwhile, Rocket Lab, which was founded in New Zealand by Peter Beck, has been the only small rocket maker to fly regular missions at about $10 million to $13 million per launch. Its Electron rocket can carry hundreds of pounds of satellites for commercial and government customers. Astra’s rocket will be capable of carrying less cargo than Rocket Lab’s, although it will only charge $3 million per launch.
The first—and last—significant rocket maker to go public was Orbital Sciences in 1990. SpaceX and Rocket Lab remain private. On the space tourism side of things, Virgin Galactic went public via a SPAC arrangement in 2019. Richard Branson’s aerospace company has been performing tests with its space plane designed to carry people up about 55 miles where they can briefly experience weightlessness.
All of these companies are part of a frenzied, global competition to reduce the cost of putting people and objects into orbit, while outflanking governments and government contractors that have long done this type of work. Companies like Astra are betting that the commercial space revolution has just begun and that there will soon be demand for daily rocket launches as startups and larger companies look to fill the skies with communications, imaging and scientific instruments.
“Since Day One, we have been focused on building a company that can completely open up access to space,” Kemp said. “We want to help launch this whole new generation of companies that are observing and connecting and improving life on Earth.”
For McCaw, the deal is a return to a business the telecom mogul tried to crack decades ago. Going back to the early 1990s, McCaw took a number of stabs at trying to lower the cost of building satellites and getting them into the space. He hoped to build a type of space-based communications and internet system similar to what SpaceX, OneWeb, Amazon.com Inc. and others are in the process of building now. According to McCaw, the traditional rocket makers and aerospace players made the costs of the underlying technology too expensive for his earlier ventures to succeed.
“The whole system was just wrong,” McCaw said. “They expected people to use crummy stuff and take on severe risk. The insurance costs alone were equivalent to about 30 of Astra’s rocket launches. We are coming back to launch because it’s the item of greatest frustration where the most change has yet to occur.” Bill Gates, a longtime business partner of McCaw, is also a backer of Holicity.
With so many companies reaching for the same territory above our heads, Astra will have to learn quickly how to turn the traditionally low-profit rocket launch business into a successful long-term venture while also outpacing competitors, McCaw said. Virgin Orbit, a private Branson venture separate from Virgin Galactic, recently reached orbit with its rocket, and other companies are expected to follow in the next couple of years. “The challenge of a business like this is making sure you don’t fall into becoming a commodity,” McCaw said. “You can see that there will have to be a shakeout in the launch business. The question is, Who gets there, and who doesn’t? That’s the critical test for Astra.”
As part of a push toward profitability, Astra plans to begin building the core elements of satellites into its rockets. This would allow satellite and scientific startups to avoid much of the grunt work. Meanwhile, Astra would be able to charge for satellite services. Rocket Lab has already moved in this same direction. “We will have a spacecraft that clicks into our rocket,” Kemp said. “This will allow customers to focus on their camera or their software or the unique radio they want to fly. We are trying to build a platform that has launch as its foundation.”
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