Space technology sector SPAC deals take off in first quarter

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The space technology industry saw an acceleration in the number of announced mergers with special-purpose acquisition companies (SPACs) so far in 2021, with 11 space-related companies announcing they are coming to market via deals with ‘blank check’ vehicles. 

In total, the first quarter has seen US$7.2bn of intended funding for the space sector, compared to US$7.7bn for the whole of last year, according to research by Seraphim Capital, which managed the Seraphim SpaceTech Index.

Confirmed deals in the quarter included Rocket Lab USA announcing a merger with Vector Acquisition Corp (NASDAQ:VACQ) in a deal valuing the small rocket launch company at US$4.1bn; satellite group Spire Global combining with NavSight Holdings Inc (NYSE:NSH) in a deal valuing its at roughly US$1.6bn; and follow satellite operator BlackSky, which is reversing into Osprey Technology Acquisition Corp (NYSE:SFTW).

“It marks a ‘watershed moment’, and a belief that the transformative potential of SpaceTech is now becoming accepted within the investment community with SPACs as the main means of accelerating their ability to access the capital required to realise their visions,” said Seraphim.

Overall venture capital investment into the sector in the last year was 95% higher than in the 12 months prior to the COVID-19 pandemic, according to the analysis, when Virgin Galactic Holdings Inc (NYSE:SPCE) was one of the first SPAC mergers and the first space company.

Europe has continued to close the gap on North America in terms of average deal sizes, thanks to significant transactions including large deals such as for London-based OneWeb and Volocopter.

Major deals in the US included Spire Global announced a merger with a SPAC called NavSight valuing the company at $1.6bn. 

Venture investment in the space sector this year looks set to reach another record, with $2.7bn closed in the first quarter compared to $1.6bn in early 2020 and the third consecutive quarter where total investment has been above $2.5bn. 

“We believe SpaceTech is at the nexus of mega-trends that will define societal change over forthcoming decades and has a unique role to play in addressing the world’s most pressing problems,” said James Bruegger, Seraphim’s chief investment officer. 

“Radical advances in the Space sector mean a data and connectivity tsunami is about to transform the world as we know it, driving the next major paradigm shift in the global economy. Having so far largely weathered the worst of the impact of the downturn, the New Space economy is now primed for further strong growth in 2021 and beyond.”

Investing in the space sector

Investors wanting to invest in space companies can do so via a pair of US-listed ETFs, or directly via a small handful of space specialists or some larger aerospace and satellite companies.

The first specialist ETF was the Procure Space ETF (NASDAQ:UFO) and it was recently joined by Cathie Wood’s ARK Space Exploration & Innovation ETF (BATS:ARKX), which have very different portfolios, but some crossover in their holdings such as aerospace giant Lockheed Martin and software company Trimble. 

Elon Musk’s SpaceX, perhaps the best known of the new breed of space company, is privately owned but one major backer is FTSE 100-listed Scottish Mortgage Investment Trust (LON:SMT).

Outside of Virgin Galactic and satellite companies such as Maxar and Eutelsat, there are few specialist companies currently listed, though some larger conglomerates have significant ‘space’ businesses such as Boeing, Thales and Northropp Grumman.  

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