Economy could dampen growth of space industry

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LONG BEACH, Calif. — Broader economic issues as well as the performance of some space companies could slow the growth of the industry in the next few years, executives warn.

During a panel discussion at the Space Tech Expo here May 25, Lars Hoffman, senior vice president of global launch services at Rocket Lab, warned that the industry is not immune from broader economic issues like supply chain disruptions, inflation and growing concerns about a recession.

“We’re seeing right now a bit of a chilling going on within the industry,” he said. “This heating up of the market that we saw in the last couple of years when times were a little bit better, COVID excepted, is starting to level off a little bit.”

“There’s going to be a little bit of a lull, if you will, over the next year or two, and then things should start picking back up again,” he said. “It’s still growing. It’s just not growing as fast as we were expecting or hoping two years ago or one year ago.”

A factor in any slowdown, he said, could be a decrease in capital available to invest in startups. “If that starts to slow down,” he said, “that cools down the progress that a lot of us are making.”

Some are worried that investor interest in space companies in general, regardless of economic conditions, could be diminishing. Jordan Noone, co-founder and general partner of Embedded Ventures and a co-founder of Relativity Space, said at another conference panel May 24 that the performance of space companies that have gone public in the last year through mergers with special purpose acquisition corporations (SPACs) could deter more investment. Those companies have, in general, seen sharp declines in stock prices over the last several months.

“The fact that the space SPAC community had some of the worst returns and worst exposure once those companies became public is going to haunt the growth investor community for 5 or 10 years,” he said.

Those investors, he said, may go back to “safe investments” in information technology fields rather than invest further in space if it’s seen as riskier, causing the industry to lose some of the momentum it’s gained in recent years. “The growth investors have all been spooked.”

Rocket Lab is one of those companies that went public through a SPAC merger. While it has done better than many of its peers, its stock price has been sliding for several months, and is now at less than half the $10-per-share value of the original SPAC.

“It’s a hard path,” Hoffman said of going public. “You better have your business in order before you do that if you want to survive, let alone thrive.”

He noted the company has taken steps to diversify its business and serve a wider range of markets. “You’re building in diversity because those markets tend to rise and fall on different cycles,” he said. “You don’t get yourself caught up in just one single cycle.”

Not everyone is pessimistic about the market. In a May 24 interview, Max Haot, chief executive of Launcher, said his company is seeing strong demand that likely will remain the case because of the strategic importance of space, citing the role commercial satellites have played in response to Russia’s invasion of Ukraine.

“We’re very bullish on the market,” he said. “We’ll see what happens with the economy, but it’s certainly the right sector to be in at this time.”