The once high-flying space finance sector has come crashing back to Earth. Two years ago, startups were raising large rounds or going public through mergers with special purpose acquisition companies, or SPACs. There seemed to be no shortage of funding for companies working on capital-intensive efforts like launch vehicles or satellite constellations.
The outlook is now much grimmer. For example, on Aug. 1, Virgin Galactic reported quarterly losses of $134.4 million on just $2 million in revenue and cautioned that revenue would remain low even as its SpaceShipTwo spaceplane begins commercial suborbital flights. The same day, Earth imaging company Planet said it was laying off more than 100 employees, or 10% of its workforce, as the company struggled with “increased cost and complexity” linked to rapid growth after going public through a SPAC.
As Planet and Virgin Galactic made their announcements, a panel of investors discussed the state of financing space companies at the International Space Station Research and Development Conference in Seattle. The wave of investment the industry saw two years ago has come and gone, and likely won’t come back soon, they concluded.
“We saw a little bit of a fad developing around space in 2020 and 2021, where we had ‘tourist’ investors come in because it was cool,” said Mislav Tolusic, co-managing partner and chief investment officer of Marlinspike Partners. “Now AI is cooler than space.”
Lewis Jones, an investment associate with Generation Space, the U.S. arm of British venture firm Seraphim Space, noted higher interest rates played a role. “Generalist investors much prefer to invest and get 5% on Treasury bonds versus risky startups,” he said. “We’re seeing fewer generalist investors in this market.”
The industry is also dealing with the hangover from SPAC deals. “It played out in an unproductive way for the space sector in ’21 and ’22,” said Tom Gillespie, managing partner of In-Q-Tel. “It wasn’t the best vehicle for some of those companies to go public. We’ll see less of that going forward.”
Tolusic, though, saw one benefit of the SPAC deals. “It pruned a lot of the investors who, quite frankly, didn’t know how to invest in space. They didn’t understand how hard it is and what are the things to look for when you invest in those companies.”
The capital available to space companies is significantly less than a couple years ago, but there are still opportunities. Gillespie noted that early-stage investment remains strong, citing the example of an unnamed startup raising an oversubscribed Series A round that In-Q-Tel is participating in.
It’s more difficult, though, for later-stage companies seeking to raise more money, he said. “Even the best companies that are getting funded right now, a good outcome is a flat round” that keeps its valuation unchanged, he said.
The good news is that there are signs of an uptick in industry investment. Jon Lusczakoski, vice president at AE Industrial Partners, said a lot of venture capital is tied up in companies that have, on paper, generated a return for those funds, but still need an exit — a merger or acquisition, or going public — to secure those returns and reinvest the money.
“The rest of 2023 will be similar to what it has been so far this year, relatively flat,” he said. “Then in 2024 we’ll start to see more of a pickup as more capital gets out there and gets deployed.”
There’s likely to be more bad news in the near term, though, as companies struggle to raise money. Companies that went public through SPAC deals are, in some cases, running out of cash or face the risk of delisting from stock exchanges as their share prices plummet.
“There are some short-term challenges here,” said Gillespie, such as a lack of exits. “In the long term, I think this is a really interesting industry. It’s going to keep growing.”
It’s also, Tolusic said, arguably more important than the industries now considered cool by investors like AI. “We’re building something that is a lot bigger than figuring out how to spot a cat inside a picture.”
This article originally appeared in the August 2023 issue of SpaceNews magazine.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
