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.