We are short shares of Astra Space, a $2.0bn space launch company formed at the peak of the 2021 SPAC bubble – with no revenue, no track record of reliability, and no established market for its undersized vehicle. A story stock that’s yet another example of the questionable businesses going public via SPACs, Astra faces massive obstacles in its quest to develop a viable business model.

Astra is poorly positioned within an overcrowded market for small launch vehicles. Its main competitors will soon be launching larger 1,000kg+ payload rockets while Astra has yet to overcome developmental hurdles necessary to successfully launch even a single satellite into any of the emerging broadband mega-constellations. Shortly after Astra announced its SPAC merger, the company increased its payload capacity goal (not a trivial matter in rocket programs) and signed a “secret” deal with a competitor for access to some of the competitor’s more powerful engine IP – both clear signs that Astra is struggling to keep pace with market leaders. Moreover, Astra shortsightedly relies on cheap, off-the-shelf commercial parts – a strategy that precludes it from exploiting the economic advantages that its more sophisticated competitors enjoy by developing reusable rockets that in the long run reduce expenses. Consequently, Astra remains strikingly vulnerable to the relentless price deflation that characterizes today’s launch market.

Astra’s investor pitch boils down to selling the pipedream of an unprecedented number of cheap rocket launches. Astra’s forecast calls for 300 launches per year by 2025, a whopping 10x more than SpaceX achieved in 2021. Management markets this exceptionally aspirational goal (which we view as pure fantasy) in a bid to spread its expensive Bay Area manufacturing costs over enough rockets in order to turn a profit. A reality check is in order: To date, Astra has managed just one successful orbital test flight. If Astra’s five-year projection of almost daily successful launches of rockets made with non-aerospace grade parts does not sound improbable enough, it ignores an even graver problem with Astra’s projection – not one expert whom we interviewed, nor any independent market study we reviewed, offered any reason to think that, industry-wide, sufficient market demand will exist for Astra to sustain approximately daily launches by 2035, let alone 2025.

From an execution standpoint, Astra is already exhibiting tell-tale signs of a company that’ll never fulfill its grandiose promises. FY21 EBITDA guidance of negative $(110)m is -35% lower than projected at the start of the year. Post-merger cash on hand – originally touted as sufficient to fully fund the company until daily launch in 2025 – is now only enough to cover monthly launches in 2023, meaning Astra will almost certainly need to tap the capital markets in the upcoming year. We’re skeptical that public investors will stick around at the current valuation to underwrite Astra’s tenuous business prospects, and the lock-up expiry of 92m shares tomorrow could result in near-term volatility. As Astra encounters inevitable setbacks, hemorrhaging cash in hopes of developing a rocket that is undersized and lacking demand, its shares valued at the height of the SPAC boom should tumble further to the ground.

Read full report here.