Small-Launch Leader Rocket Lab Going Public Via a SPAC, With Plans for Bigger Neutron Rocket

Rocket Lab
  • Rocket Lab, the leader among companies building small rockets to launch satellites, is going public through a SPAC merger.
  • The company is merging with Vector Acquisition Corp. in a deal that values Rocket Lab at a $4.1 billion enterprise valuation.
  • Rocket Lab also unveiled plans for a second, larger rocket called Neutron to lift even more payloads than its current Electron rocket that has launched to orbit 18 times.

Rocket Lab, the leader among companies building small rockets to launch satellites, is going public through a SPAC merger that values the company at more than $4 billion when the deal closes.

The company is combining with Vector Acquisition, a special purpose acquisition company. Rocket Lab will list on the Nasdaq under the ticker RKLB when the deal closes, which is expected in the second quarter.

"This milestone accelerates Rocket Lab's ability to unlock the full potential of space through our launch and spacecraft platforms and catalyzes our ambition to create a new multi-billion-dollar business vertical in space applications," Rocket Lab CEO Peter Beck said in a news release.

Beck spoke to CNBC in depth about the company's growth plans after it goes public.

Vector's SPAC currently trades under the ticker VACQ. Shares of the SPAC climbed as much as 48% in trading on Monday from its previous close of $10.25 a share.

The SPAC deal values Rocket Lab at an enterprise valuation of $4.1 billion, with the company expecting to have about $750 million in cash after the merger is complete. That cash includes up to $320 million from Vector Acquisition, as well as a $470 million PIPE round led by Vector Capital, BlackRock and Neuberger Berman, among other investors.

PIPE, or private investment in public equity, funding allows private investors to buy public shares at below-market prices. A SPAC is a special purpose acquisition company in which investors give essentially a blank check to a company for the purpose of unspecified acquisitions of other firms.

Beck will continue to lead Rocket Lab as CEO, with Vector Capital's chief investment officer Alex Slusky set to join the company's board of directors – alongside Khosla Ventures' Sven Strohband, Bessemer Venture Partners' David Cowan, DCVC's Matt Ocko, and independent director Mike Griffin.

Notably, Rocket Lab's announcement comes on the same day as satellite data venture Spire Global revealed that it too will merge with a SPAC to go public. Both Rocket Lab and Spire Global count Bessemer as an investor, with partners Cowan and Tess Hatch on the companies' respective boards.

Unveiling the bigger Neutron rocket

Rocket Lab

Rocket Lab also unveiled plans for a second, larger rocket called Neutron to lift even more payloads than its current Electron rocket. The company has launched 97 satellites on 18 Electron missions to date.

Its Electron rockets are priced at about $7 million per launch, standing at about 60 feet tall and capable of lifting as much as 300 kilograms to low Earth Orbit.

Neutron, which is expected to launch in 2024 for the first time, will stand at 131 feet tall and will be capable of carrying as much as 8,000 kilograms to low Earth orbit, the company said. Rocket Lab did not disclose how much Neutron is expected to cost per launch, noting that its first launch will come from NASA's Wallops flight facility in Virginia.

The company expects Neutron to cost about $200 million to develop, with Rocket Lab currently assessing locations across the U.S. to build "a new state-of-the-art factory to support large-scale Neutron manufacturing."

Rocket Lab also said Neutron will have a reusable first stage (also known as the booster), which will "land on an ocean platform." The company also noted that Neutron will be capable of launching astronauts to the International Space Station, adding another capability to the company's repertoire.

Building on pole position

Rocket Lab's Electron rocket lifts off on July 4, 2020.
Rocket Lab
Rocket Lab's Electron rocket lifts off on July 4, 2020.

Founded by Beck in New Zealand in 2006, Rocket Lab is now based in Long Beach, California and has 530 employees. The company launches from a private complex on New Zealand's Mahia Peninsula, and has built a launchpad at Wallops 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 medium lift rockets being developed by Firefly Aerospace, ABL Space, Relativity Space and more.

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 atmosphere to slow down the rocket, then deploys a parachute and uses a helicopter to pluck the booster from out of the sky.

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

Rocket Lab booked $2 million in space systems revenue last year and expects the unit will become a major driver in the years to come, forecasting $656 million in revenue by 2027.

In total, Rocket Lab's investor presentation says it has a current active pipeline of $2.2 billion in opportunities for its launch, spacecraft systems and space components businesses.

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