Back in the 1990s, cellular telecom pioneer Craig McCaw bought into a vision of ubiquitous wireless service via a constellation of satellites, with an assist from Microsoft co-founder Bill Gates.
Almost a quarter-century later, McCaw’s Teledesic venture is long-dead, but the dream lives on — thanks to the impending merger of McCaw’s Holicity “blank check” company and Astra, one of the rising stars of the satellite launch industry.
The deal — which takes advantage of the trend toward using special purpose acquisition companies, or SPACs, to take startups public — values Astra at a double-unicorn level of $2.1 billion, and would unlock up to $500 million in cash proceeds.
Not bad for a space company that hasn’t yet quite made it to orbit.
“This transaction takes us a step closer to our mission of improving life on Earth from space by fully funding our plan to provide daily access to low Earth orbit from anywhere on the planet,” Chris Kemp, Astra’s founder, chairman and CEO, said Tuesday in a news release announcing the merger.
During an investor call, McCaw invoked Teledesic’s history as well as the current rise of broadband mega-constellations such as SpaceX’s Starlink network and Amazon’s yet-to-be-launched Project Kuiper.
“I’ve long believed that there has been an amazing opportunity to provide communication satellites, essentially an internet in the sky, with the opportunity to provide the internet anywhere and everywhere, fulfilling one of humanity’s great needs — and very consistent with the needs represented by a pandemic,” he said.
McCaw noted that “we see all of that happening now with the Starlink and Kuiper constellations coming with thousands of satellites, when we used to think of one satellite as a big thing.”
The projected cost of launching a fleet of weighty satellites into low Earth orbit was what doomed Teledesic back in the 1990s. Since then, telecom satellites have become smaller and less expensive. Launch costs have dropped dramatically as well, with SpaceX leading the way.
McCaw said Astra is well-positioned to take the next step in satellite launch.
“The missing element has been small launch, simple launch, cheap launch that is available on literally a day’s notice … going anywhere in the world and launching virtually from a concrete or gravel path without all the government red tape, because it is so simple that it doesn’t need it,” he said. “And this has created the opportunity for Astra.”
Kirkland, Wash.-based Holicity filed the paperwork for an IPO last July, with McCaw as CEO and chairman. At the time, Holicity said it would look for merger opportunities in the telecom, media and technology industry.
That all ties in well with McCaw’s past leadership roles at McCaw Cellular Communications, Nextel Communications and Clearwire. McCaw’s crowning business achievement was the $11.5 billion sale of McCaw Cellular to AT&T in 1994. Forbes currently estimates his net worth at $1.9 billion.
Kemp, who co-founded California-based Astra in 2016, said during the investor call that his company has already booked more than $150 million in contracted launch revenue.
In December, a demonstration launch from Alaska barely missed getting to orbit as planned — but Kemp voiced confidence that orbital missions would begin this summer. “We have now our first 50 launches under contract,” he said.
The Astra-Holicity transaction is expected to close by mid-2021, pending approval by Holicity’s stockholders. Kemp is due to be the CEO of the combined company, which would trade on NASDAQ under the “ASTR” stock symbol. McCaw is expected to join Astra’s board of directors.
Astra said the merger would give it access to the $300 million in cash that’s currently held in Holicity’s trust account — plus up to $200 million in private investments, led by funds and accounts managed by BlackRock.
Astra’s chief financial officer, Kelyn Brannon, said the transaction would set Astra’s current pre-money equity value at $2 billion, with a post-merger, pro forma enterprise valuation of $2.1 billion.
“We are projecting that we’ll be profitable by 2024,” said Brannon, who served as Amazon’s first chief accounting officer from 1998 to 2000.
In the startup world, SPAC mergers like the Astra-Holicity deal have become popular alternatives to the traditional process for initial public offerings, and the aerospace industry is in tune with the trend. The most notable example is Virgin Galactic, which went public in 2019 through a blank-check merger with Social Capital Hedosophia.
Virgin Galactic Holdings is currently trading at more than $50 a share, compared with a pre-merger price of $11.79 for Social Capital Hedosophia’s shares. Similarly, word of the Astra deal gave a boost to Holicity’s publicly traded shares. On Monday, the share price at market close was $10.34. Today the price rose as high as $17.60.
There’s more to come: This week, regulatory filings laid out the financial details for a blank-check venture that’s being planned by former Boeing CEO Dennis Muilenburg. His Chicago-based SPAC, New Vista Acquisition Corp., aims to raise about $200 million in an IPO with the intent of acquiring a venture operating in the aviation, aerospace and defense industries.