Is Intuitive Machines the last space SPAC?
If US plans for renewed exploration on the Moon have you excited, you’ll soon be able to make a financial bet on the endeavor: Intuitive Machines, which NASA hired to bring cargo to the lunar surface, is going public and expects to trade as LUNR on the NASDAQ stock market.
Intuitive is merging with a publicly traded special purpose acquisition company, or SPAC, called Inflection Point Acquisition Corp. The deal is valued at $1 billion, and should leave the company with $350 million of cash on its balance sheet.
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Intuitive was founded in 2013 by longtime NASA contractor Kam Ghaffarian and former NASA executives Steve Altemus and Tim Crain to provide components and services for spacecraft development. When the US space agency decided to hire businesses to do robotic reconnaissance missions on the Moon ahead of the next generation of arriving astronauts, Intuitive Machines won contracts to deliver science payloads and develop a “hopper-lander” that could bring them into deep craters.
In recent years, a number of space companies have gone public through SPAC transactions with mixed results. Some firms still have not solved out their business model or generated revenue reliably, like Virgin Galactic and Momentus. Others, like Planet and Rocket Lab, have been able to grow revenue and demonstrate traction as public companies. But none have risen above the $10 pro forma share price used by SPACs. To be fair, the Fed’s tightening of monetary policy and post-pandemic changes in investing behavior have seen most high tech stocks in the market plunge.
Intuitive’s plans for space economy dominance
Intuitive says it will generate revenue of $102 million this year and forecasts $291 million in 2021. That’s not unreasonable, given the NASA contracts on their books worth $262 million. But in 2024, the company predicts $759 million in revenue. That’s quite a jump, which will require taking several business lines—data services at the Moon, orbital services, and space products and infrastructure—that earn about $8 million today and growing them to earn $480 million in 2024. Given the failures of other space SPACs to deliver on similarly rosy projections, and the frequent delays in space activities, that may be unrealistic. And with the SEC eyeing rule changes that will make SPACs less attractive, it may be one of the last space firms to go public this way.
The company is betting on continued public investment in activities around the Moon as NASA’s hoped-for landing date of 2026 approaches. It expects to offer a communications network, navigation services, and uncrewed transportation to and from the surface. However, there’s considerable uncertainty about how NASA will transport people to the Moon. Struggles getting the first Artemis 1 test mission off the ground and with a pathfinding spacecraft called Capstone show how tricky it can be to rely space exploration proceeding in a linear direction.
Still, Intuitive Machines is one of a handful of companies, including Astrobotic, Draper, and Firefly Aerospace, that is well positioned to compete for $2.6 billion in contracts to help NASA do the dirty work of getting to the Moon. If you think the lunar economy could be a goldmine, this is the picks and shovels investment play. Ghaffarian, Intuitive’s executive chairman, is also a founder and chair of Axiom Space, a leading space tourism firm that is vying to build its own space station in Earth orbit. He and his colleagues have clearly figured out how to work well with NASA—and that’s a valuable skill.
