SPAC is a ‘supercharger’ for growth

Rocket Lab will go public in the coming months via a SPAC merger, and CEO Peter Beck spoke with CNBC to tear down the space company’s opportunities thanks to the deal’s cash stack.

“This is like a supercharger – we have everything we need now to do the things we dreamed of,” said Beck.

The company is merging with Vector Acquisition in a deal that gives Rocket Lab an enterprise value of $ 4.1 billion, and the move is expected to be completed in the second quarter.

Rocket Lab is the leader in the small-launch market, with its Electron rocket having placed nearly 100 small satellites in orbit in recent years. The company has also built a spacecraft manufacturing company to provide customers with a versatile platform to match its rockets.

But now, with projected proceeds of about $ 750 million from the IPO, Rocket Lab will build a larger rocket called Neutron. The launch marketplace is divided into three sections – small, medium and heavy lift – and Neutron will target that medium section.

In addition, Rocket Lab will build Neutron within the requirements needed to launch a spacecraft that carries people, to be able to launch astronauts to the International Space Station.

Beck expects Rocket Lab will spend approximately $ 200 million to develop Neutron, adding that the remainder of the company’s capital will be used to expand the company’s existing business lines and make acquisitions.

“We can put all that money to good use,” said Beck.

Beck cited Electron’s history of successful launches and the company’s relationships with multiple customers as a catalyst for his decision to build Neutron – despite claiming in previous years that Electron was the largest rocket his company would develop.

“We now understand where everyone is going and we understand everyone’s business plan,” said Beck.

Rocket Lab expects that “the majority of all satellites launched in the coming years” will be for constellations – the name of the space industry for satellite networks with tens to thousands of spacecraft working together.

Neutron is designed to be more than twice the size of Electron, and capable of carrying as much as 8,000 kilograms to low Earth orbit. That would place it in the same capacity class as Russia’s Soyuz missile, which Beck says is “the most productively launched missile in history.”

“If you are going to produce a vehicle of this class, you would fail to ensure it was suitable for manned space flight,” said Beck.

Rocket Lab expects Neutron to launch for the first time in 2024, with Beck noting that the company will do additional work to “ensure it is certifiable for manned space flight.”

Currently, SpaceX is the only US company to regularly fly astronauts, and NASA certified its Falcon 9 rocket for manned space flight late last year. Those certification requirements include design elements ranging from propellant tanks to redundancy strategies, Beck noted.

Considering that it would be comparable in capabilities to the Russian Soyuz, Beck said Neutron would be able to lift a spacecraft that can hold three people – although that will depend on the design of the spacecraft itself.

Neutron’s booster – the bottom and most expensive part of the rocket – will also be reusable, similar to how SpaceX lands its Falcon 9 rocket boosters. Rocket Lab has been testing a method to restore its Electron boosters, which Beck said informs the company’s designs for Neutron.

Neutron is launched from the pad the company built at NASA’s Wallops flight facility in Virginia.

While the company’s rocket and spacecraft are being produced at its headquarters in Long Beach, California, Rocket Lab will look elsewhere to build a new Neutron manufacturing facility.

“One of the things that I am really fond of is building near the launch site,” said Beck. “Being able to build close to the launch pad will, I believe, be a real key element for this vehicle.”

The Neutron plant would create hundreds of jobs. While not specifying which cities or regions are being considered, Beck noted that Rocket Lab is currently “running a competitive process of figuring out exactly where.”

Rocket Lab expects many elements from Electron to be transferred directly to Neutron, with Beck recommending a shared product line for items such as avionics or electronics.

The end goal for Neutron is “an excellent workhorse” that is reusable, Beck said.

That means developing a new vehicle structure, as he emphasized that the carbon composites that make up the Electron missiles are challenging given the heat endured in the reentry process. Rocket Lab analyzes harder materials, Beck said, so neutron boosters can often be reused.

The engines for Neutron are another hurdle that Beck acknowledged taking the longest to develop when building a rocket.

Rocket Lab will not use a variation of the 3D-printed Rutherford engines that power the Electron missiles, as Beck said, “there is no amplification from a Rutherford that comes close” to powering Neutron.

“But it’s not like we haven’t built an engine before,” said Beck, adding that the company “has a deep understanding of additive manufacturing for engines that will be used as the basis for the new engine program.”

Building a production line that is scalable is the most “painful” part of building an orbital rocket, Beck said – an idea that SpaceX founder Elon Musk has similarly emphasized with his company’s Starship rockets.

“Elon and I unanimously agree that the hardest part of getting into orbit the first time is actually scaling up production to do it over and over again,” Beck said.

Rocket Lab’s experience building Electron and then scaling production to an almost monthly launch rate are lessons learned that Beck said will inform how the company builds Neutron and production.

Rocket Lab is one of six aerospace companies to announce deals with specialty acquisition companies in recent months, a trend in the growing industry as companies seek capital. Beck noted that Rocket Lab was “on a very methodical path to a traditional IPO” before considering merging with a SPAC.

“This has enabled us to not only accelerate the path, but also the ability to execute the projects we want,” said Beck.

He also stressed that Rocket Lab is building a vertical spacecraft platform and developing everything from engines to spacecraft components in-house.

That belief is reflected in Rocket Lab’s financial forecast, where space systems are expected to generate nearly as much by 2027 as the launch of the company’s estimated $ 1.6 billion in revenue.

“It is a fundamental belief that if you have a launch vehicle and satellites and satellite components and you are vertically integrated, your ability to do really meaningful things in the space applications marketplace is unmatched,” said Beck.

Beck said that belief “happens in real time” with SpaceX’s Starlink satellite Internet project. He thinks other satellite broadband companies are “finding it difficult to compete with the Starlink rollout” because SpaceX has its own production as well as its own rockets.

“One of the things we’ve done [at Rocket Lab] The past decade has been a very methodical approach to building all the infrastructure that we need within the business to run some really big things in the application market, ”said Beck.

As for his company’s differentiator from the other space SPACs, Beck said Rocket Lab is about “proven execution.”

“We are very good at doing what we say we can,” said Beck. “Within this industry there are many promises and many aspirations. What I’ve always been very careful about is that we don’t talk about anything until we do or when we have a lot of confidence.”

The transparency around financial execution versus ambitions is “the beauty of a public market,” Beck added. For investors looking to buy into the aerospace sector, Beck said “look at our track record and make your own decision.”

“We are very pleased to bring a high quality spacecraft to market,” added Beck. “What you get at Rocket Lab is a proven company and a prudent management team that have been proven to deliver and will continue to deliver.”

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