Crazy. I didn't know you could acquire things worth 20x more than you.
There are a lot of folks out there that are overly cynical and so they'll just write things like the OP from time to time which just don't make much sense or have much to do with how the real world works. What's more interesting is looking at or trying to understand strategically why Rocket Lab is making this move, especially if you are an investor.
Iridium market cap was 5.5b and this transaction values it at 8b.
Why was Amazon valued at billions while making zero profit?
The stock market prices companies by many factors, revenue and profit are factors but so is growth.
Utilities companies make lots of profits but they are valued badly because they don’t grow at all!
Markets are forward looking and space is seen as a huge growth driver for the future, also RocketLab has been growing their top line revenue massively over the last few years.
But RocketLab did have five years of strong revenue growth. And they have a lower PS ratio than SpaceX. So at least compared to industry-rivals the valuation is justified
I've made hundreds of thousands of dollars from my early investments in RKLB but this isn't true if by "complete" you mean they have a proven launch vehicle. The company is now targeting late 2026 for Neutron's inaugural flight.
Neutron was announced in 2021. There were hopes for a 2024 first flight. Then it was mid-to-late 2025. Now it's Q4 2026 after a failure related to the stage 1 tank earlier this year.
If anyone can pull off using carbon composite for a launch vehicle of this size, it's RKLB. But nobody has done it before and I think the retail investor base is taking for granted something that is not at all guaranteed. There's much more risk than a lot of people think.
In some ways, RKLB is more like pre-clinical biotech stocks, which usually produce binary outcomes (a drug succeeds or it fails, and the company's fate is based on that). If Neutron works, RKLB gets to execute its grand vision. If it fails, it doesn't. The vision (and valuation) doesn't work without Neutron.
The company won't go bankrupt if Neutron is delayed but I disagree with the "easily" part and Iridium complicates the picture. It throws off a lot of cash but comes with a $3.6 billion bridge loan that RKLB will need to deal with in the next year. If they term it out with debt, the leverage goes way up. If they term it out with equity, there's real dilution risk, especially in the scenario where the market prices in Neutron delays (because the stock almost certainly will be lower).
The reality is that Neutron is critical to the RKLB story, and that story is what supports the current valuation. Even after the recent decline from the ~$150 peak, this is a very richly valued company priced for close-to-perfection.
The biggest risk is that carbon composite approach proves not to be viable for a launch vehicle of this size and RKLB has to fundamentally change the design. While I wouldn't have invested in this company if I thought that risk was >50%, it's definitely not as close to 0% as most retail investors seem to believe.
So let's say they need to 20x or 30x revenue. That would mean their new size needs to be similar in size to the current space market as a whole. If they have a compelling price, that might require a 5x growth in the space market as a whole? Less than that if you think they're really good at pulling in the new customers? I don't understand where you got 100x.
Iridium's revenue is larger, and I wouldn't think they'd be losing money.
But apparently you can buy things with promises (if you're in the right club, of course).
Even better: if you buy things that don't lose their value overtime (mostly anything apart from food, car, electronics, services) and you buy them at price, they're free. You give money for them but you receive equal amount of wealth. I repeat: you buy the thing and your wealth stays the same, doesn't grow or shrink. That's how companies can buy each others with promises.
(If you're a bank that can lend me $4.7T I think buying nvidia could benefit us both. Contact me at nick @ gmail . com)
His coverage of the downfall of FTX was hilariously good as well. Wrt. to the infamous Excel sheet, he wrote something like "when you're trying to calculate this, Excel shouldn't give you back a number, it should warn you about going to prison", lmao.
People do this all the time, that's how they buy their first house (or at least used to...). Your net worth is basically zero beyond what you saved for the down payment, but the bank advances you the money to buy the house because it believes your future income streams will allow you to pay the principal plus an interest.