Rocket Lab CEO says SPAC deal is ‘a supercharger’ for growth and adds ability to launch astronauts
CEO Peter Beck stands at the base of the fairing, or nosecone, of the Neutron rocket the company is developing.
Rocket Lab is going public in the next few months through a SPAC merger and CEO Peter Beck spoke to CNBC to break down the space company’s opportunities thanks to the deal’s cash pile.
“This is just like a supercharger – we have all the things we need now to go and do the things that we’ve dreamed of,” Beck said.
The company is merging with Vector Acquisition in a deal that gives Rocket Lab a $4.1 billion enterprise value, with the move expected to be complete in the second quarter.
Rocket Lab is the leader in the small launch marketplace, with its Electron rocket carrying nearly 100 small satellites to orbit over the past couple of years. The company has also built a spacecraft manufacturing business, to give customers a versatile platform that pairs with its rockets.
But now, with about $750 million in cash proceeds expected from going public, Rocket Lab will build a bigger rocket called Neutron. The launch marketplace is divided into three sections – small, medium and heavy lift – and Neutron will target that medium section.
Additionally, Rocket Lab will build Neutron within the requirements necessary to launch a spacecraft that carries people, to be capable of launching astronauts to the International Space Station.
Beck expects Rocket Lab will spend about $200 million to develop Neutron, adding that the rest of the company’s capital will go toward expanding the company’s existing business lines and making acquisitions.
“We have strong uses for all of that cash,” Beck said.
What Neutron adds for Rocket Lab
Beck noted Electron’s history of successful launches and the company’s relationships with multiple customers as the catalyst for its decision to build Neutron – despite him in previous years proclaiming that Electron was the biggest rocket his company would develop.
“We understand now where everybody’s going and we understand everybody’s business plan,” Beck said.
Rocket Lab expects that “the majority of all satellites launched” in the next few years will be for constellations – the space industry’s name for satellite networks with anywhere from dozens to thousands of spacecraft working together.
Neutron is designed to be more than twice as tall as Electron, and capable of carrying as much as 8,000 kilograms to low Earth orbit. That would put it in the same capability class as the Russian Soyuz rocket, which Beck noted is “the most prolifically launched rocket in history.”
“If you go and produce a vehicle of this class, you would be remiss to not ensure that it was human spaceflight capable,” Beck said.
SpaceX’s Crew Dragon Endeavour seen docked with the International Space Station on July 1, 2020.
Rocket Lab expects Neutron to launch for the first time by 2024, with Beck noting the company will put in the extra work to “ensure that it’s certifiable for human spaceflight.”
Currently the only U.S. company regularly flying astronauts is SpaceX, with NASA late last year certifying its Falcon 9 rocket for human spaceflight. Those certification requirements include design elements ranging from propellant tanks to redundancy strategies, Beck noted.
Given that it would be similar in capabilities to Russia’s Soyuz, Beck said Neutron would be capable of lifting a spacecraft that holds three people – although that will depend on the design of the spacecraft itself.
Neutron’s booster – the bottom and most expensive portion of the rocket – will also be reusable, similar to how SpaceX lands its Falcon 9 rocket boosters. Rocket Lab has been testing a method of recovering its Electron boosters, which Beck said is informing the company’s designs for Neutron.
Building a factory near the Virginia launchpad
An Electron rocket stands on the company’s launchpad at NASA’s Wallops facility in Virginia.
Neutron will launch from the pad the company has built at NASA’s Wallops flight facility in Virginia.
While the company’s rocket and spacecraft manufacturing is performed at its headquarters in Long Beach, California, Rocket Lab will look elsewhere to build a new factory for Neutron manufacturing.
“One of the things that I’m very sold on is building close to the launch site,” Beck said. “Being able to build close to the launchpad I think is going to be a real key element for this vehicle.”
The Neutron factory would bring hundreds of jobs with it. While he did not specify which cities or regions are under consideration, Beck noted that Rocket Lab is currently “running a competitive process to figure out exactly where.”
Rocket Lab expects many elements of Electron will directly transfer to Neutron, with Beck touting a shared product line for items such as avionics or electronics.
The end goal for Neutron is “an excellent workhorse” that is reusable, Beck said.
That means developing a new vehicle structure, as he emphasized the carbon composites that make up the Electron rockets are a challenge given the heat endured during the reentry process. Rocket Lab is analyzing tougher materials, Beck said, so that Neutron boosters can be reused frequently.
The engines for Neutron are another hurdle, which Beck acknowledged are what take the longest to develop when building a rocket.
Rocket Lab will not be using a variation of the 3D-printed Rutherford engines that power the Electron rockets, as Beck said “there is no beefing of a Rutherford that will come remotely close” to powering Neutron.
“But it’s not like we haven’t built an engine before,” Beck said, adding that the company has a “deep knowledge of additive manufacturing for engines that will be baselined into the new engine program.”
Building a production line that can scale is the most “painful” part of building an orbital rocket, Beck said – an idea SpaceX founder Elon Musk has similarly emphasized with his company’s Starship rockets.
“Elon and I just unanimously agree that the hardest part of getting into orbit the first time is actually scaling the manufacturing to do it over and over again,” Beck said.
Rocket Lab’s experience building Electron and then scaling production to a near monthly launch rate are lessons learned that Beck said will inform how the company builds Neutron and its manufacturing.
Beck’s view of going public and the space SPAC boom
An Electron rocket gets ready to launch.
Rocket Lab is one of six space ventures that have announced deals with special purpose acquisition companies in the past few months, a trend in the growing industry as companies look for capital. Beck noted that Rocket Lab was “on a very methodical path to a traditional IPO” before it considered merging with a SPAC.
“What this has enable us to do is accelerate not only the path, but the ability to execute on the projects we want to,” Beck said.
He also emphasized that Rocket Lab is building a verticalized space platform – developing everything in-house from engines to spacecraft components.
That belief is reflected in Rocket Lab’s financial forecast, with space systems expected to generate almost as much as launch in the company’s estimated $1.6 billion in revenue by 2027.
“It’s a fundamental belief that if you have a launch vehicle and satellites and satellite components and you’re vertically integrated, your ability to do really meaningful things in the space applications market is unparalleled,” Beck said.
Beck said that belief is “playing out in real time” with SpaceX’s Starlink satellite internet project. He thinks other satellite broadband companies are finding it “difficult to compete with the rollout of Starlink” because SpaceX has both its own manufacturing and its own rockets.
“One of the things we’ve been doing [at Rocket Lab] over the last decade has been a really methodical approach to building all the infrastructure we need within the company to go and execute on some really big things in the applications market,” Beck said.
As far as his company’s differentiator compared to the other space SPACs, Beck said Rocket Lab is about “proven execution.”
“We are very good at doing what we say we can do,” Beck said. “Within this industry there are a lot of promises and a lot of aspiration. What I’ve always been very careful of is that we don’t talk about anything until we do it or have very high confidence.”
The transparency around financial execution versus aspirations is “the wonderful thing about a public market,” Beck added. For investors looking at buying into the space sector, Beck said to “look at our track record and make your own decision.”
“We are really excited to bring a high-quality space asset to the market,” Beck added. “What you get with Rocket Lab is a proven company and a prudent management team that has been proven to deliver and will continue to do so.”
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