Peter Beck, who has been described as New Zealand’s answer to Elon Musk, is seizing the moment and going public with Rocket Lab.
The fifteen year old company will list on the NASDAQ Thursday morning New Zealand time.
The resulting company will go under the Rocket Lab USA label, becoming a publicly traded company on the Nasdaq under the ticker symbol RKLB.
The listing is great news for many of Rocket Lab’s 600 employees – around 400 of whom are based in New Zealand.
More than a hundred past and present Rocket Lab staff will become millionaires overnight if the listing goes to plan, while around 180 hold stock worth more than $500,000 NZD according to the Herald.
Other NZ based direct investors in Rocket Lab who will be in for a payday include ACC’s investment arm and Sir Stephen Tindall’s K1W1 fund.
Around 4000 users of Sharesies have already invested just over $5m NZD into Vector Acquisition – a NASDAQ-listed special purpose acquisition company (SPAC) set up for acquiring Rocket Lab. Hatch has around 2000 investors in Vector who have invested $4m NZD.
Level four is always a boon for Mum and Dad investor platforms like Sharesies and Hatch so interest in the listing will be high.
What is Vector Acquisition Corporation?
Well you don’t really have to worry about it as Vector is simply the shell company Rocket Lab is merging with in order to float on the exchange – come Thursday morning it’ll be Rocket Lab USA on the NASDAQ.
Vector’s shareholders approved the merger last week at its annual general meeting.
Vector Capital is a private investment firm focused on the technology sector with more than 25 years experience investing in and operating private and public technology companies. Vector is led by veteran technology investor Alex Slusky who will also sit on the Rocket Lab board.
What is a SPAC?
2021 is the year of the SPAC – they’re everywhere and are often referred to as a back-door or reverse listing as it enables companies to make the leap from privately held to publicly traded in a short amount of time. It reduces the red tape and costs associated with a traditional IPO.
The downside is that investors don’t have access to a mountain of financial information about the company.
SPACs – beloved of tech start-ups – are generally considered more risky than traditional IPOs although the recent listing of My Food Bag which listed after great fanfare as an IPO on the NZX and ASX – hasn’t turned out all that well for investors – in the short term at least.
SPACs have also been known to underperform compared to traditional IPOs, and can dilute shareholder shares.
Not to be a downer, but SPACs were popular on the NZX in the boom and bust 1980s.
Why is Rocket Lab using a SPAC?
Beck told CNBC that the company was – “on a slow but methodical path to an IPO, but we chose a SPAC path to accelerate our visions and goals… we’re looking at taking it to the next level and having access to public capital enables us to embark on the next programme which is a very large launch vehicle and also gives us public currency to give us some of the M and A that we want to do… to build out a pure play end-to-end Space company”.
Essentially listing via a SPAC gives Beck a mountain of cash very quickly – $777 million USD, which is made up of funds from the SPAC and a current private investment in public equity (PIPE) round.
That money enables his company to build and launch more rockets – (Beck has indicated that it’ll invest the cash in a new class of medium-sized rockets called Neutron.)
It should be said that SPACs are not at all unusual in the space sector – Rocket Lab is the third space company to close a SPAC deal this month.
But Brad Gordon, a director and investment advisor with Hobson Wealth Partners advises caution.
He told Newsroom – “with a reverse listing, you aren’t pitching for investors, you are getting them by default and the level of due diligence is completely different – if not nil.”
“It’s very blue sky. Based on the $4.1b valuation the company will have a price-to-earnings ratio of 34 times based on 2024 EBITDA,” Gordon says.
“You’d want to see some track record of delivery before paying that.”
Shares of Vector Acquisition Corp – climbed 48% in March when the listing was announced. Then VACQ shares were trading as high as $13.95 USD a share – as of writing they are trading at $10.92 USD but trending upwards.
Is Rocket Lab profitable?
Despite the mostly gushing media coverage here (just don’t get a job there) – no.
A document filed by Vector Acquisition stated that Rocket Lab had accumulated losses of $203 million USD since 2013.
Still, Rocket Lab has told investors it expects to be profitable in the 2023/2024 financial year.
The big money, it says, will flood in when its large Neutron rocket launches in 2024.
In 2026 the company reckons it’ll be bringing in more than $1 billion in revenue.
That $4.1 billion USD valuation has troubled some observers as it is 5.4 times Rocket Lab’s estimated 2025 revenue of $749 million USD.
Nevertheless Rocket Lab has proved by doing and has enjoyed a rapid rise from humble beginnings – Beck essentially launching a New Zealand space program single-handedly.
Rocket Lab became the first private company in the Southern Hemisphere to reach space after launching its Ātea-1 sounding rocket in November 2009.
Today it is the leader in small-launch rockets that get compact satellites into orbit.
Those satellites mean we can stream movies, listen to music, study the weather, gather data and facilitate payment systems.
Rocket Lab builds everything in-house and Beck says that bigger, perhaps manned launches, are planned for its future.
Its rockets are also sustainable, or will be in the future, and use revolutionary reusable first-stage technology.
It even plans to add guided parachutes to future test flights, snagging the parachute-descending rocket with a helicopter before it hits earth.
Launches are planned for Mars, Venus and the moon in the near future.
David McEwen, publisher of the McEwen Investment Report believes it’s a difficult company to value, but doesn’t think the $4.1 billion dollar value is excessive.
“It’s about how many rockets they will be launching in ten years,” he told Newsroom.
“It could be none or it could be thousands. Like most technology businesses, the failure rate is high.
“Still, Rocket Lab has proved itself in the past against high odds. It will be part of the fun to see where it goes. Just do your homework.”