Seraphim’s investment trust gets firepower for bigger space deals

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TAMPA, Fla. — Space startup investor Seraphim Capital’s investment trust started trading on the London Stock Exchange July 14, raising about $250 million for larger international acquisitions.

The listing gives the group “the firepower to become really impactful in this market,” Seraphim Capital CEO Mark Boggett told SpaceNews.

Seraphim Space Investment Trust, which now trades under the SSIT.L ticker, is initially taking over Seraphim Capital’s stakes in 15 of the 19 space technology companies it has invested in. 

It plans to pick up the remaining four — satellite data specialist Spire Global, quantum encryption firm Arqit, Earth imaging operator Iceye and space logistics firm D-orbit — once each firms’ separate, ongoing fundraising activities close this year.

Boggett said Seraphim will first focus on making more investments in its existing portfolio, which in addition to the 19 under Seraphim Capital includes stakes in 27 companies through its Seraphim Space Camp Accelerator.

“Those where we have the highest conviction we’re planning to double down, triple down or even quadruple down on our holdings,” he said.

Seraphim is also tracking new opportunities where in some cases previous funding constraints held it back from making an investment. 

In other cases, Seraphim is taking a fresh look at ventures that have overcome technical and commercial risk that prompted Boggett and his partners to take a pass during early funding rounds.

“These are the businesses we are planning to add to the portfolio – and at a pace that will take some by surprise,” Boggett said.

Although the newly trading SSIT.L trust can invest in both public and private companies, Seraphim Capital has committed to only investing in listed space companies that it had bought into while they were still private. 

According to Boggett, this way Seraphim Capital can use the due diligence the investor did on a private company to give it an “information advantage” once it becomes public. 

Public space

Seraphim Space Investment Trust could hold onto what it sees as its best performing companies for decades, which it sees as a key advantage of the U.K.’s Investment Trust listed vehicle arrangement.

The public fund’s value is based on the overall performance of its portfolio companies, meaning investors take their profits by selling their shares, rather than Seraphim Capital serving as the manager returning proceeds from an exit. 

Previously, investors would pressure Seraphim Capital to sell a space company as soon as it reached a high valuation to reap profits.

Space-based cellular network startup AST SpaceMobile, which Seraphim Capital had a stake in before transferring it to the trust, was valued at more than $1 billion when it went public earlier this year by merging with a special purpose acquisition company (SPAC).

Spire and Arqit also have valuations north of $1 billion as they work through their own SPAC mergers — a trend in the space industry that is sending many early-stage companies to the public market.

Seraphim Capital says its long-term strategy will give it an advantage over other investors flocking to the sector, because most venture funds are set up to sell all their assets during a 10-year period.

“Seraphim’s interests are therefore better aligned with founders and we hope this will enable us to win mandates against traditional venture funds,” Boggett said.

Other advantages include increased flexibility to invest in any geography, currency or deal structure, and the ability to raise fresh funds on the public market in a matter of weeks rather than months.

New challenges 

However, public companies are subject to stricter disclosure rules that add additional regulatory burdens on their businesses.

And while Seraphim being put under the microscope does not mean it has to provide detailed information about the finances of the companies it invests in, the share price of the trust can be impacted by underperformance.

“Venture stage, pre-profit companies are often a roller-coaster ride, as such the bias of this Investment Trust is growth stage companies, [in Series B] or later, which have retired some technical and commercial risks,” Boggett added.

Although the Investment Trust structure is specific to the U.K. market, he expects to see variations in the U.S., Europe and Asia amid growing public investor appetite for space investments.

As well as more space companies going public through SPAC mergers, Seraphim forecasts traditional initial public offerings (IPOs) will also sharply increase in the second half of this year.

Emirati satellite fleet operator Yahsat also started trading on the Abu Dhabi Securities Exchange (ADX) July 14, with shares ending their first day of trading up 1.8% following an IPO process.

Mubadala, the United Arab Emirates’ state-owned investment company, raised about $730 million from selling a 40% stake in Yahsat through the listing.

Swiss startup Astrocast also recently said it is considering becoming a public company to expand its satellite constellation.

“This bodes well for the portfolio companies of the venture investors and thus the appetite for such investors to back earlier fledgling companies with big ambitions,” Boggett said. 

“We predict 2021 will be a record year for the domain marking the year that crossover investors found a taste for space.”