COLORADO SPRINGS — Aerospace and defense companies have raised more than $11 billion in the first quarter of 2021 through mergers with special purpose acquisition companies. The SPAC trend does not appear to be letting up, says a new report by Avascent and Jefferies, but analysts caution that these deals, while attractive for space companies, can be risky for investors.

SPAC deals have grown notably in the space sector as they provide companies faster access to the public markets. Mergers can be accomplished in three to six months, compared to the one to two-year timeline for a traditional IPO. 

In a report released Aug. 23, Avascent and Jefferies analysts looked at recent high-profile space SPACs that raised billions of dollars based on aggressive growth projections: AST Space Mobile, Arquit, Redwire, Spire, Satellogic, Planet, BlackSky, Rocket Lab, Astra and Momentus.

Although all these companies are in the space sector, “not all SPACs are created equal,” the report says, due to the wide range of valuations across companies and because they don’t follow the traditional valuation methods such as trailing EBITDA. That is the earnings before incomes taxes, interest, depreciation and amortization for the most recently ended fiscal year. “Instead, valuations are largely anchored on forward year multiples of revenue and EBITDA,” the report says. 

Because they use forward metrics, space SPACs can be a bargain for investors if companies hit their projections. 

For example, the report points out, BlackSky’s deal with Osprey Technology Acquisition Corp. was struck at a $1.1 billion, or roughly 6.3x 2024E EBITDA. By comparison,  Maxar recently traded as high as 12x 2021E EBITDA.

“If BlackSky’s forecasts are realized, it’s a steal at the current value, even if it appears rich based on next year’s financials,” says the report. 

Rocket Lab’s announced deal value of $4.1 billion is 9.1x 2024 revenue. “That may feel heady until you compare it with Virgin Galactic at 19.4x. The right multiple isn’t obvious,” analysts wrote. “One of the pillars of valuation is comparable companies analysis and we are witnessing entirely new comp sets being built across the new space ecosystem.”

Sandra Erwin writes about military space programs, policy, technology and the industry that supports this sector. She has covered the military, the Pentagon, Congress and the defense industry for nearly two decades as editor of NDIA’s National Defense...