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That is what traders ought to find out about rocket builder Astra because it prepares for its IPO

Rocket 3.1 launches in Kodiak, Alaska.

Astra / John Kraus

The rocket maker Astra is preparing to go public in the second quarter. He competes against a crowded field of competition and aims for daily deliveries to space by 2025.

CEO Chris Kemp spoke to CNBC this month about the company's plans for the upcoming cash infusion.

Once Astra completes its merger with Holicity, a special-purpose acquisition company, the company expects to have capital of up to $ 500 million.

That includes a previously unreported $ 30 million round of funding that the missile builder closed prior to announcing its SPAC deal.

Astra, based in Alameda, Calif., Has raised the smaller round to get "faster" while the merger awaits regulatory approval, with Holicity and existing investors like Marc Benioff contributing.

"We're actually building a space platform – much like we did when Amazon started out when they didn't market themselves as a delivery truck or warehouse company," Kemp said. "We're really trying to solve our customers' problem, which is that they want to get things into space quickly."

Aside from the financial support, Astra is entering a field full of competitors.

For starters, its 40-foot-tall rocket belongs to the small launch vehicle subsector – a category of the space industry that analysts and executives estimate includes more than 100 startups at various stages of development. All of these endeavors want to compete with the little rocket leader Rocket Lab.

Astra's rocket is said to be able to put up to 100 kilograms into low-earth orbit for just $ 2.5 million for a special launch. Kemp anticipates that price will fall as Astra accelerates to a weekly launch rate in 2023 and beyond.

"The plan is fully funded through 2025 to meet daily space delivery," he said.

It's a formidable destination. "You talk about almost one start a day," said Ken Herbert, analyst at Canaccord Genuity.

"Is it theoretically possible? Yes. But will a company be able to support this kind of schedule in four years? It's ambitious – no one has ever done it."

"That doesn't mean it's impossible, but everything has to go well, including COVID-19," said Herbert. "And there are other factors at play – if you have an anomaly on one of these starts everything else will be (delayed)."

The latest SPAC offers on space

CEO Chris Kemp speaks via video conference from Astra's headquarters in Alameda, California.

CNBC

Astra was the youngest private rocket builder to make its first appearance in space in December after its Rocket 3.2 vehicle launched from Alaska.

Although the missile did not reach orbit on that mission, Astra's leadership viewed the launch as overcoming the final hurdles required to enter commercial service later that year.

Astra's Board of Directors includes Kemp, Co-Founder and Chief Technology Officer Dr. Adam London, Advance Executive Nomi Bergman and ACME Venture Capital Partner Scott Stanford.

Holicity Chairman and CEO Craig McCaw is expected to join the board when the merger is complete.

The SPAC merger values ​​the missile company with an enterprise value of $ 2.1 billion. It will be listed on the Nasdaq under the ticker symbol ASTR when the deal is closed.

Holicity's shares have risen roughly 50% since the deal was announced on Feb.2. The SPAC's stock rose to $ 22.47 per share, but slipped last week, trading closer to $ 16 per share.

The company is one of the youngest in a number of space companies to announce IPO deals through a SPAC in the past few months, alongside BlackSky, AST & Science and Momentus in recent months.

Richard Branson's Virgin Galactic went public in 2019 through a contract with Chamath Palihapitiyas SPAC.

$ 30 million in front of the SPAC

The company's headquarters near San Francisco Bay, California.

Astra

Astra expects cash proceeds of up to $ 500 million after the deal. That total includes $ 200 million from a BlackRock-led "private investment in public equity" or PIPE fundraising round.

"We have convinced BlackRock and a whole host of other conservative long-only investors that when you start making small missiles on a large scale, the economics as well as offsets what you get with a giant missile. You get the same economics if you start making hundreds. " missiles from a factory every year, "said Kemp.

The $ 30 million venture funding round that Astra completed prior to the SPAC merger announcement included a $ 10 million infusion from Holicity.

Marc Benioff, Chairman and CEO of Salesforce.com, speaks during the grand opening of the Salesforce Tower in San Francisco on May 22, 2018.

David Paul Morris | Bloomberg | Getty Images

Astra's investor presentation revealed that the company is generating more than $ 150 million in contracted revenue from government and business customers to launch more than 100 spacecraft.

The company also has a $ 1.2 billion pipeline for future launches, though Kemp called this "kind of mushy stuff" like Memorandum of Understanding (MOU) agreements.

Kemp said Astra was "trying to come up with a 100-year plan" and last year at the start of the pandemic, he "ran lean things" to complete its missile development tests.

Astra's chief technology officer, Kemp and London, control the company's shareholders and together own around 30% of the company.

Both have super-voting stocks that vote 10 to 1 versus common stock – a common practice for Silicon Valley companies.

"Companies building long-term businesses and founders who are committed to a long-term vision or business are not letting investors take over their businesses," said Kemp. "It didn't happen on Facebook, Google or Amazon, and I think those are the companies we are striving for."

The main risks of Astra

A close-up of the Rocket 3.2's engines shortly after takeoff.

Astra / John Kraus

The company's risk factors, which are set out in filings with the Securities and Exchange Commission, also give investors an idea of ​​the challenges Astra may see in achieving its goals.

Astra stressed that it "has not yet put customer satellites into orbit with any of our launch vehicles or missiles and that any setbacks we might suffer on our first commercial launch for 2021 and other demonstration and commercial missions will have a material negative impact on ours." could business. "

The marketplace for launching small satellites is another important risk.

Astra noted that while the market will see significant growth in the coming years, it is "still developing" and "not well established". With other companies building small missiles, Astra expects to face "intense competition".

Finally, regulatory delays outside of Astra's concern are another risk, as the company requires licenses from U.S. regulators like the Federal Aviation Administration for launches.

"No company has yet carried out licensed launches at the annual rate we are aiming for," said Astra.

Scaling production

Astra set an aggressive schedule for scaling production and generating revenue, starting with its first commercial launch this summer.

Kemp said Astra built four missiles last year and set up three for launch attempts, despite Rocket 3.0 being destroyed after an anomaly on the launchpad. Rocket 3.1 had a problem with the control system shortly after taking off, which crashed after the engines were switched off.

The company has a future expansion to complete the SPAC capital, starting with more investments in its missile factory. Astra builds 95% of the rocket in-house from raw materials and has developed its own software for everything from manufacture to launch systems.

"We're going to automate the factory ourselves so we can get consistent rocket performance," said Kemp.

Astra predicts it will have three launches this year that will generate $ 4 million in revenue. The company intends to begin rolling out at a monthly rate through the end of 2021 – with a forecast of 15 launches in 2022.

This would effectively match the launch pace of Rocket Lab, which has launched 97 satellites on 18 missions to date.

The company is targeting a weekly start rate in 2023. 55 launches bring sales of $ 206 million. Astra aims to triple that rate in 2024. 165 launches and rockets soar twice a week – if the company also expects positive cash flow.

Astra plans to launch almost every day by 2025 and exceed the billion dollar mark. Starting revenue of $ 1.12 billion is projected for this year.

Build a space platform

But as Kemp mentioned above, Astra wants to do more than just build missiles.

The company is working on a cylindrical, disc-shaped "modular spaceship" so customers can integrate satellite sensors and technology demonstrations directly into Astra's rocket.

"Rockets will always be a cylinder, so (a disk is) the perfect form factor to put them in a cylinder where you don't waste volume in the rocket and then stack them," Kemp said.

The "ride-on" practice at launch has become common as small satellites couple a ride with large rockets to go into space at lower prices. But Kemp says it is a "nightmare" for these tiny satellites because "they are all dumped in the same place".

"That's the current state of the industry, and it sucks," he said. "It's like putting a FedEx truck on a plane and flying to New York and then driving back to Los Angeles and then driving the truck off a cliff."

Instead, says Kemp, Astra's modular spacecraft will allow the company to place individual satellites in specific orbits on the same launch.

Astra predicts that the modular spacecraft business will generate revenue from 2022 that is projected to grow to over $ 300 million per year by 2025.

A mobile launch service

The other differentiator that Astra has from other small rocket manufacturers is minimal, and it requires mobile infrastructure for launch, which, as a spaceport service, will become a moneymaker, according to Kemp.

"Our entire system is packaged in four shipping containers that we can put on a C-130 Hercules (airplane), truck, or ship – and we've done all of those things," said Kemp.

Astra's launch infrastructure requires five employees to unpack, who, according to Kemp, can prepare the rocket for launch in less than a week.

For the December launch of Rocket 3.2, Kemp found that one of the five employees Astra sent to Kodiak, Alaska, tested positive for COVID-19. The company has quarantined the original team in hotel rooms, chartered a plane, and flown five other people to launch the missile.

"All I need is an FAA license, we'll put a fence around a gravel field and start from there in five days with five people," said Kemp.

The company plans to add spaceports across the country and even in other countries that are US allies.

"There are 80 space agencies, 75 of which have no way of going into space," said Kemp.

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