TAMPA, Fla. — Growing space investor optimism got another lift Oct. 29 after the U.S. Federal Reserve cut interest rates by a quarter point for the second time this year, making borrowing cheaper for a capital-intensive industry already buoyed by rising defense investment.
“There just has not been a fervor in the markets like there [is] right now,” Mike Collett, managing partner of early-stage investor Promus Ventures, said Oct. 29 on a Satellite Innovation panel in Mountain View, California.
“It’s a great time to be raising money,” he added, across the private and public markets.
Return of the SPAC?
Karl Schmidt, managing director at investment bank KippsDeSanto & Co., pointed to a broader four-fold increase in the number of special purpose acquisition companies (SPACs) launched so far this year. SPACs, publicly listed shell companies offering a faster route to the stock market, helped a surge of space firms go public several years ago during a wave of investor exuberance that left many missing their financial targets.
In the space sector, reusable launch vehicle developer iRocket agreed in July to merge with BPGC Acquisition Corp., a SPAC backed by former U.S. Commerce Secretary Wilbur Ross.
“So I guess SPACs are back,” Schmidt said, adding that this time is different thanks to stricter governance rules adopted by the U.S. Securities and Exchange Commission last year.
“I think there’s going to be continued SPAC activity,” he said, while also predicting a wave of initial public offerings in the defense technology market over the next 12-18 months, which could draw more investors toward space companies with military ties.
However, while Collett said he expected to see some SPAC deals in the space sector, he stressed that few companies currently have the high margins and revenue growth needed to succeed in the public limelight.
“I don’t think SPACs are back,” he said.
SpaceX and other private space firms with attractive businesses are also enjoying strong appetite in secondary markets, Collett added, where employees and early investors can sell shares without a public listing.
“At some point you need to … go out and go public, because there’s a whole lot of other good things that can happen with that,” he said, “but we’re still going to see private companies stay private for a long time.”
In addition to interest rates, Collett said investors are watching for any slowdown in major tech companies’ capital spending on artificial intelligence infrastructure, which has also helped drive recent market exuberance.
Any pullback could temper broader investor sentiment currently lifting valuations across deep tech sectors, including space.
The Federal Reserve’s decision to bring interest rates below 4% for the first time since late 2022 was itself divisive, dampening expectations of another cut when policymakers meet again in December.
