Wall Street financial firm condemns Astra as bad investment
Capitalism in space: In a blunt critique announcing its decision to short sell Astra stocks, the Wall Street financial firm Kerrisdale Capital condemned the startup rocket company as a poor investment.
Kerrisdale’s analysis focuses on two issues, Astra’s under-powered rocket and the company’s prediction that it will launch as many as 300 rockets a year by 2025.
Astra’s rocket launch projections are nonsense. No market analysis supports Astra’s planned 300+ launches by 2025. Excluding satellites from SpaceX and China from industry-wide forecasts, there is insufficient demand to support even a fraction of Astra’s aggressive forecast.
Large launch vehicles are a more efficient and cost-effective solution to deploying whole orbital planes versus piecemealing coverage through a series of small launches and will dominate the market for mega-constellations (which are widely expected to comprise the bulk of all satellites deployed over the next decade). Only scraps will remain for Astra and all the other smaller launchers—far less than Astra needs to turn a profit.
Astra is falling behind its competitors. Multiple industry executives we interviewed, who routinely secure launch services for small satellite manufacturers on a global basis, agree that Astra’s rocket dimensions and payload capacity are well below the “sweet spot” of customer needs.
The publication of this report caused an immediate 10% drop in Astra’s stock, though it then recovered somewhat.
The report has some validity, though it assumes that the market for rocket launches will remain the same as it has for decades, an assumption that is simply false. Things always change. What happened before is no guarantee it will happen that way in the future.
Moreover Astra’s strategy is to built a small rocket that is very very cheap. It hopes that low price will bring it cubesat customers who want a launch on schedule and sent to their chosen orbit, something they do not get when they are secondary payloads on larger rockets. There is a strong possibility that this strategy will work, based on the fast growth in the satellite industry in the past decade when SpaceX and Rocket Lab forced launch costs to drop from $100 to $500 million to $6 to $60 million.
Kerrisdale’s report however is a valid wake-up call, and suggests that Wall Street’s recent passion to pour money into many new startup rocket companies (estimated by some to exceed a hundred) might finally be easing.
Readers!
Please consider supporting my work here at Behind the Black. Your support allows me the freedom and ability to analyze objectively the ongoing renaissance in space, as well as the cultural changes -- for good or ill -- that are happening across America. Fourteen years ago I wrote that SLS and Orion were a bad ideas, a waste of money, would be years behind schedule, and better replaced by commercial private enterprise. Only now does it appear that Washington might finally recognize this reality.
In 2020 when the world panicked over COVID I wrote that the panic was unnecessary, that the virus was apparently simply a variation of the flu, that masks were not simply pointless but if worn incorrectly were a health threat, that the lockdowns were a disaster and did nothing to stop the spread of COVID. Only in the past year have some of our so-called experts in the health field have begun to recognize these facts.
Your help allows me to do this kind of intelligent analysis. I take no advertising or sponsors, so my reporting isn't influenced by donations by established space or drug companies. Instead, I rely entirely on donations and subscriptions from my readers, which gives me the freedom to write what I think, unencumbered by outside influences.
You can support me either by giving a one-time contribution or a regular subscription. There are four ways of doing so:
1. Zelle: This is the only internet method that charges no fees. All you have to do is use the Zelle link at your internet bank and give my name and email address (zimmerman at nasw dot org). What you donate is what I get.
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4. Donate by check, payable to Robert Zimmerman and mailed to
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Capitalism in space: In a blunt critique announcing its decision to short sell Astra stocks, the Wall Street financial firm Kerrisdale Capital condemned the startup rocket company as a poor investment.
Kerrisdale’s analysis focuses on two issues, Astra’s under-powered rocket and the company’s prediction that it will launch as many as 300 rockets a year by 2025.
Astra’s rocket launch projections are nonsense. No market analysis supports Astra’s planned 300+ launches by 2025. Excluding satellites from SpaceX and China from industry-wide forecasts, there is insufficient demand to support even a fraction of Astra’s aggressive forecast.
Large launch vehicles are a more efficient and cost-effective solution to deploying whole orbital planes versus piecemealing coverage through a series of small launches and will dominate the market for mega-constellations (which are widely expected to comprise the bulk of all satellites deployed over the next decade). Only scraps will remain for Astra and all the other smaller launchers—far less than Astra needs to turn a profit.
Astra is falling behind its competitors. Multiple industry executives we interviewed, who routinely secure launch services for small satellite manufacturers on a global basis, agree that Astra’s rocket dimensions and payload capacity are well below the “sweet spot” of customer needs.
The publication of this report caused an immediate 10% drop in Astra’s stock, though it then recovered somewhat.
The report has some validity, though it assumes that the market for rocket launches will remain the same as it has for decades, an assumption that is simply false. Things always change. What happened before is no guarantee it will happen that way in the future.
Moreover Astra’s strategy is to built a small rocket that is very very cheap. It hopes that low price will bring it cubesat customers who want a launch on schedule and sent to their chosen orbit, something they do not get when they are secondary payloads on larger rockets. There is a strong possibility that this strategy will work, based on the fast growth in the satellite industry in the past decade when SpaceX and Rocket Lab forced launch costs to drop from $100 to $500 million to $6 to $60 million.
Kerrisdale’s report however is a valid wake-up call, and suggests that Wall Street’s recent passion to pour money into many new startup rocket companies (estimated by some to exceed a hundred) might finally be easing.
Readers!
Please consider supporting my work here at Behind the Black. Your support allows me the freedom and ability to analyze objectively the ongoing renaissance in space, as well as the cultural changes -- for good or ill -- that are happening across America. Fourteen years ago I wrote that SLS and Orion were a bad ideas, a waste of money, would be years behind schedule, and better replaced by commercial private enterprise. Only now does it appear that Washington might finally recognize this reality.
In 2020 when the world panicked over COVID I wrote that the panic was unnecessary, that the virus was apparently simply a variation of the flu, that masks were not simply pointless but if worn incorrectly were a health threat, that the lockdowns were a disaster and did nothing to stop the spread of COVID. Only in the past year have some of our so-called experts in the health field have begun to recognize these facts.
Your help allows me to do this kind of intelligent analysis. I take no advertising or sponsors, so my reporting isn't influenced by donations by established space or drug companies. Instead, I rely entirely on donations and subscriptions from my readers, which gives me the freedom to write what I think, unencumbered by outside influences.
You can support me either by giving a one-time contribution or a regular subscription. There are four ways of doing so:
1. Zelle: This is the only internet method that charges no fees. All you have to do is use the Zelle link at your internet bank and give my name and email address (zimmerman at nasw dot org). What you donate is what I get.
2. Patreon: Go to my website there and pick one of five monthly subscription amounts, or by making a one-time donation.
3. A Paypal Donation or subscription:
4. Donate by check, payable to Robert Zimmerman and mailed to
Behind The Black
c/o Robert Zimmerman
P.O.Box 1262
Cortaro, AZ 85652
You can also support me by buying one of my books, as noted in the boxes interspersed throughout the webpage or shown in the menu above.
I agree with the analysis. It is very nice to read an elaboration from someone who has decided to pay attention to reality. That’s a rarity today. Mr. Z .: Is there a similar analysis to RocketLab?
Short selling is one of those “let’s make money off another’s misfortune” ideas that bother me. It is now in their interest to see the stock tank so they can make money. How does that add to either the economy or the good will of a company? It is just a leech sucking the life out of the financial sector.
Advocates who pushed for larger rockets have at last been vindicated.
Large-launcher advocates have support, but not vindication, from this.
The next-to-last paragraph of Bob’s post makes a good case for the market for small launchers.
Jeff Wright:
Rocketlab’s Mr. Beck has abandoned his original business plan (one launch of his “Electron” rocket per week) and is now leading the development of the medium-sized and largely reusable “Neutron” rocket. I give RocketLab a good chance because of Mr. Beck’s skills. However, the economic success of this company is also not certain. Would you buy their stocks?
Comment: Astra has actually already recognized the problem with its small rocket and wants to completely revise it (also use an engine design from Firefly) in order to be able to transport a payload of 500 kg.
I don’t know anything about Astra’s projections, which is what is part of what being criticized. But in general I’d be a long-term contrarian to anything that is published by who-knows-whom in a newspaper or online. Anyone who has bought Astra stocks and now sells it because having read someone saying something about it online, doesn’t know what he/she is doing.
Of course there’s a very bright future for small satellites! 300 launches a year is quite doable. When prices go down, demand will come. What did IBM say in the 1970s about the total potential demand for computers? Didn’t Bill Gates say that there will never be any need for more than 650 kilo bytes RAM? Wasn’t GPS developed for military use only, without any imagination of how there could be another market for it?
“- iPhone will never sell anything, because it is smaller than a wall mounted phone box!”
Yeah. Because computers, sensors and batteries and everything is growing in size all the time. Or not so much.
And I’m saying this having advocated small satellites being launched together with large payloads on large rockets. But there is of course a huge and fast growing market for small launchers too. They are so much easier to handle and reuse.
Questioner,
Actually Kerrisdale Capital likes Rocket Lab in this post . They see a lot of small sat launchers, but Rocket Lab is also looking at larger payloads with the Neutron rocket, and that shows they want a larger share of the market.
As a side-note, Kerrisdale also shorted their Virgin Galactic holdings and compared it to a roller coaster ride.
Jay: Thanks. Very interesting. Another advantage of RocketLab is that the company boss is also chief designer, just like at SpaceX. Beck certainly does not have the entrepreneurial or predatory skills that Elon Musk does. But I would rate Beck’s rocket science skills and knowledge higher than Musk’s.
It is also interesting that Beck took a different and, for me, more plausible path than Musk when it came to choosing the engine technology. While Musk wants to get the last bit of efficiency and performance out of his engines with a combustion chamber pressure of 300 bars, Beck tries to achieve a high level of reliability with moderate combustion chamber pressure (100 bars?) and a relative simple gas generator cycle.
“What did IBM say in the 1970s about the total potential demand for computers?” I worked for IBM after I retired from the Army and it was a well known story. In the early 1940s, IBM’s president, Thomas J Watson, reputedly said: “I think there is a world market for about five computers.”. Tom Watson Jr disagreed and felt the company should plunge into the market after WW2, the success of which led to his father stepping down and Tom Jr succeeding him
I bought 20 shares of RocketLab and 20 shares of Astra. I’m prepared for either or both purchases to become worthless. But, if they don’t…
Grab a really big bucket of popcorn and watch the show!
There is a reason most entrepreneurs came across as crazy/egotistical/stubborn/illogical. It’s because a sensible person couldn’t handle the maddening uncertainties of creating a high investment new tech product in this rapidly changing market.
I’m particularly interested in Rocket Lab/Neutron vs SpaceX.
Rocket Lab founded by an engineer with what he felt was a better rocket design (the electric turbopump concept) vs Space X founded by someone with no particular design in mind, just someone who wanted to lower the cost of getting stuff into space so he could eventually get to Mars (with reusability the key concept that developed).
Now SpaceX figures on building a simpler/cheaper steel rocket and making up for the weight with sophisticated efficient engines.
Rocket Lab says better to go with simpler, less stressed engines (no more electric turbopump) and make up for the lost thrust with a sophisticated, lightweight CFRP rocket.
May the best idea/execution win!
Astra is at the mercy of the future Sat market. So it’s not just developments in rocket tech but developments in electronics/communications, politics (concerns about space debris etc) that will determine demand for small sat launches.