The coronavirus has led to unprecedented market volatility with global equity markets down 30-50%. The space industry is not immune to this global pandemic. OneWeb, one of the leading broadband mega-constellations, filed for bankruptcy last Friday, falling victim to the liquidity crunch. Several rocket launches (Arianespace, Rocket Labs) and space missions (ESA) have been suspended or delayed, while other are forging ahead (NASA operation of ISS Mars Mission, launch of SpaceX's Crew Dragon)
Fund raising will be challenging for startups with corporate ventures and financial institutions pulling back. While most VCs are hunkering down to focus on portfolio companies, some see opportunities to invest in long-term winners at more attractive valuations. Industry consolidation is likely to accelerate with weaker players going out of business, which should lead to a stronger industry in recovery. In our view, some areas of the space ecosystem are better positioned than others to weather the storm and could see higher demand. Below is a summary of how different parts of the space industry are impacted by COVID-19.
Satellite Communications (SES, Intelsat, Eutelsat, Telesat, ViaSat and etc.): Traditional satellite TV, consumer broadband and cellular backhaul should remain steady or grow from most of the world watching TV, e-learning and working from home under lockdown. Demand for mission critical satellite communications is likely to increase for first responders and warfighters to stay securely connected on the move. Inflight connectivity and maritime, key growth drivers prior to the pandemic, will slow with the airline and cruise industries being negatively impacted by COVID-19. More importantly, FCC officials confirmed the C Band spectrum auction for 5G remains on track. A successful auction would inject much needed cash (up to $9.7 billion) to the big 4 operators to pay down debt and position for future growth.
Space Infrastructure: Maxar Technology, the leading player in Earth Observation and Space Infrastructure with an annual revenue of $1.7 billion, hosted a bullish Investor Day in early March to discuss it growth strategy aligned with national security priority. Unfortunately, the message was overshadowed by the spread of COVID-19. In Space Infrastructure, Maxar has pivoted from building large GEO communications satellites to flexible smallsat space architecture across multiple mission sets for both government and commercial markets. In an update last week, the company warned about potential delays due to COVID-19 supply chain disruptions, although the company remains open for essential operations as a mission critical aerospace government contractor.
Earth Observation: Maxar plans to extend its lead with the launch of the new Legion Constellation to deliver high resolution (30 cm) and high frequency (up to 15x a day in high demand areas) GEOINT data and analytics for Defense/Intel customers. On the Commercial side, new use cases are driving demand for mapping and communications solutions enabling ubiquitous mobility, IoTs and autonomous applications. Several Earth Observation companies (Orbital Insight, Descartes Labs, Mapbox, Ursa, SpaceKnow and etc.) are seeing growing customer interest and demand to use satellite imagery to track the spread of COVID-19, assess the economic impact and monitor critical infrastructure by using analytics such as predicting global oil inventories and gauge Chinese factory activities.
DoD/Government Support for Commercial Space: The US DoD is committed to supporting the commercial space industry, requiring contractors working in critical infrastructure to continue working during the coronavirus emergency to support national security. This includes those who work in aerospace, mechanical and software engineers, manufacturing and production, IT support, security, intelligence, aircraft and weapon systems maintenance, suppliers of medical supplies and pharmaceuticals, and critical transportation. The Space and Missile Systems Center (SMSC), responsible for Space Force procurement, plans to keep up the flow of contracts to small businesses to support innovative commercial startups during the crisis. For example, Slingshot Aerospace won a Small Business Innovation Research (SBIR) award last week matched by private VC to expedite deployment of AI analytics to the Air Force. In addition, the $2-trillion US stimulus bill passed last week includes a $17 billion loan program for “businesses critical to national security.” According to the Washington Post, this loan program was crafted largely for Boeing, but other firms could also receive a share of the money.