Rocket Lab begins trading on the Nasdaq, with SPAC merger growing its cash pile

• Rocket Lab began trading on the Nasdaq on Wednesday, becoming the latest space company to close a merger with a special purpose acquisition company and go public.
• "I don't think it will take long for investors to differentiate between the company that's consistently delivering and the ones that have aspirations to deliver sometime in the future," Rocket Lab CEO Peter Beck told CNBC.
• The company merged with SPAC Vector Acquisition, which valued Rocket Lab at $4.8 billion in equity, and the transaction added $777 million in gross cash proceeds.

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Rocket Lab began trading on the Nasdaq on Wednesday, becoming the latest space company to close a SPAC merger and go public — and adding substantially to its cash pile in the process.

"We're super excited to bring a high-quality space asset to the market," Rocket Lab CEO Peter Beck told CNBC.

The company merged with special purpose acquisition company Vector Acquisition, which valued Rocket Lab at $4.8 billion in equity. The deal, and the $777 million in gross proceeds from it, will help the company grow its core small rocket business, further expand its spacecraft unit, and build a larger rocket called Neutron to take on Elon Musk's SpaceX.

"It's a tremendous amount of capital … really puts us in a position not only to be aggressive in our organic growth but aggressive on our inorganic growth as well," Beck said.

A SPAC raises money from investors through an initial public offering and then uses the cash to acquire a private company and take it public.

Shares of Rocket Lab declined over 11% in trading on Wednesday from its previous close of $11.57. Asked about the stock's debut slide, Beck said he hasn't "really even been watching it" and emphasized that, "at the end of the day, we're in this for the long term."

Rocket Lab is among a trend of space companies going public through SPAC deals, with Virgin Galactic the first of the recent generation, in 2019. Rocket builder Astra, satellite broadband focused AST & Science, satellite data service Spire Global, and space delivery specialist Momentus have each begun trading. BlackSky, Redwire, Satellogic, and Planet are expected to follow in the coming months.

"I don't think it will take long for investors to differentiate between the company that's consistently delivering and the ones that have aspirations to deliver sometime in the future," Beck said.

A maturing space business

Founded by Beck in New Zealand in 2006, Rocket Lab is headquartered in Long Beach, California, and has more than 500 employees.

Rocket Lab is the leader in the small-launch marketplace, with its Electron rocket carrying 105 satellites to space since its first orbital launch three years ago. The company launches from a private complex on New Zealand's Mahia Peninsula and has built a launchpad at NASA's Wallops flight facility in Virginia for Electron launches.

Rocket Lab holds a strong position in the launch market next to SpaceX, with the companies currently the two leaders regularly launching privately developed rockets to orbit. Rocket Lab's launch business booked revenues of $13.5 million in 2018, $48 million in 2019 and an estimated $33 million in 2020. Despite the hit last year, Rocket Lab expects launch revenue growth to rebound this year and steadily climb to $915 million by 2027.

But the launch marketplace — generally divided into the three sections of small, medium and heavy lift — is steadily growing. Rocket Lab's Electron faces rising competition from the rockets being built by those such as Astra and Virgin Orbit, while Neutron will face off with the rockets of SpaceX, United Launch Alliance, Firefly Aerospace, ABL Space, and Relativity Space.

Beck's company has recently been testing a method of recovering its Electron boosters — the most expensive part of the rocket — to reuse them, a practice SpaceX has made routine. But unlike SpaceX, Rocket Lab has been testing a new approach given the small size of its rockets. The company uses the friction of atmospheric entry to slow down the rocket, then deploys a parachute and uses a helicopter to pluck the booster from out of the sky.

Rocket Lab expects to conduct the first re-flight of a recovered Electron rocket booster next year.

Beyond Electron, the company in 2019 expanded its business into building spacecraft that pair with its rockets. Called Photon, the spacecraft is designed as a new versatile platform for companies and organizations to use to test and operate technologies in space.

A step further with Neutron

Neutron, more than twice as tall as Electron and capable of carrying as much as 8,000 kilograms to low Earth orbit, is Rocket Lab's step up the rocket food chain.

The cash from going public is crucial to Neutron, as Rocket Lab expects to spend about $200 million to develop the next-generation rocket. Rocket Lab aims to launch Neutron for the first time by 2024.

Rocket Lab earlier this month updated its investor presentation with a slide saying that a "significant Neutron reveal" is "coming soon." Beck, when asked what the announcement will be about, said, "We're so sick of people copying us."

"We're holding our cards closer to our chest on Neutron," Beck said. "Neutron should look like a rocket [designed] in 2050, right?"

The company's design for Neutron will be based on what it's learned building and launching Electron. The new rocket's booster — the bottom and most expensive portion of the rocket — will be reusable, similar to how SpaceX lands its Falcon 9 rocket boosters. Additionally, Rocket Lab will build Neutron within the requirements necessary to launch a spacecraft that carries people, to be capable of launching astronauts to the International Space Station.

Rocket Lab expects to launch Neutron from the Wallops flight facility and will build a new factory for it nearby. The company plans to break ground on the new facility in the fourth quarter of this year.

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