Although space may be the final frontier for trekkies, it’s hardly an exclusive one. From the launch of the Soviet Union’s Sputnik satellite to laboratory animals to eventually humans, civilizations for millennia wondered what lay beyond their atmospheric borders. Thanks to rising technologies and the unquenchable thirst for knowledge, modern generations command intellectual privileges that their ancestors could only dream about.
With the universe beyond the horizon representing an opportunity least blemished by human hands, some scientists have supported the thesis to leave well enough alone. Interestingly, while moviegoers regard the iconic film Aliens as a classic science-fiction horror film, one of the underlying motifs behind this great work was that big corporate interests often supersede broader ethical concerns, to ghastly results as the fictional Colonial Marines soon discovered.
Of course, the mere existence of risk factors will not stop profit-seeking enterprises from participating in aspirational industries. Though the space economy is a largely unprecedented opportunity, the upside potential of this sector has drawn significant capital inflows. Having substantially commercialized terrestrial resources — as a reminder, water comprises 71% of the Earth’s surface — it’s only logical that companies look skyward.
Nevertheless, the space economy has not been a consistent success for its early pioneers, thus attracting both intrigue and concerns for the initial public offering (IPO) of Satellogic Inc.
What is Satellogic?
Arriving to the public arena via a reverse merger with a special purpose acquisition company (SPAC), Satellogic specializes in the development and distribution of Earth-observation satellites. Specifically, Satellogic gained intense interest for its ability to “remap the entire planet at both high-frequency and high-resolution, providing accessible and affordable solutions for customers.”
According to Howard Lutnick, Chairman and CEO of Cantor Fitzgerald & Co. and CF Acquisition Corp. V (NASDAQ: CFV), the SPAC that combined with Satellogic, the underlying technology provides “limitless opportunity,” enabling the firm to “address a host of applications.” Many of the imaging service’s utilitarian functions involve critical needs, such as generating real-world analytics to help address climate change.
When is the Satellogic IPO Date?
One of the more heavily watched new listings, Satellogic entered the IPO calendar on Jan. 26, 2022. However, because of its business combination with a SPAC, technically, Satellogic’s journey to the public market began with CF Acquisition Corp. V’s debut in the first quarter of 2021.
To briefly explain, SPACs have no underlying operations. Instead, their purpose is to launch an IPO in order to raise funds for an eventual merger. Typically, SPACs have two years to complete a business combination with a private enterprise. Should a deal close, the SPAC provides a “backdoor” pathway to the capital market while the merger target provides the actual business.
On paper, CF Acquisition Corp. V distributed 25 million units at $10 each, with one unit consisting of a share of Class A common stock and one-third of a warrant, exercisable at $11.50 per share. Shares debuted on the Nasdaq exchange, the same place where you will find Satellogic shares trading under the ticker symbol SATL.
Cantor Fitzgerald provided the sole bookrunning services for the IPO. It also served as CF Acquisition Corp. V’s financial and capital markets advisor. Additionally, the firm served as the placement agent for the underlying private investment in public equity (PIPE) round of $100 million.
By the most apparent measures, Satellogic benefited from significant institutional support, which ordinarily implies a positive trajectory for the associated equity unit. However, the timing of this IPO is now a cause for serious concern.
Broadly speaking, Wall Street’s jitters provide a less-than-encouraging backdrop for SATL stock. Between Jan. 3 and Jan. 25, the S&P 500 index dropped slightly over 9%. While morning trading in the following session printed a strong percentage-basis increase, the overall profile of the benchmark indices is decidedly negative.
Concerns that the Federal Reserve publicly disclosed regarding soaring consumer prices have forced the central bank to signal a hawkish tightening of monetary policy. Subsequently, the rising cost of borrowing will likely discourage entrepreneurs from seeking capital financing, which in turn incentivizes investors to rotate out of risk-on assets into stable, dividend-bearing companies.
This dynamic segues into sector-specific concerns about the space economy. Though the aspirational valuation of the industry may well number into the trillions, investors are presently focused on what is, not what might be if all the stars align correctly. Thus, at minimum, prospective investors of SATL stock should expect a bumpy ride.
Satellogic Financial History
One of the greatest difficulties of assessing the forward-looking viability of a SPAC is its financial history or lack thereof. Unlike your bread-and-butter IPO, which involves a private company going on a roadshow to attract institutional investors to its offering, SPACs are essentially blind orders: you know the management team and a basic idea of what it’s seeking. Other than that, it’s speculation until the big reveal.
However, some astute investors, based on their particular financial situation in combination with their due diligence on a particular SPAC’s executive team, have accepted these orders because of the structure of shell companies. If a SPAC fails to complete a business combination within the contractual time limit, it must return the money at the redemption rate (usually the initial offering price of $10).
For some early investors, the opportunity of a SPAC securing a compelling deal is worth the opportunity cost of redemption. However, since a two-year opportunity cost is quite substantial, SPAC investors are theoretically more incentivized to see their deals go right. But that’s where the financial conundrum lies with SATL stock.
Per The New York Times, SPAC redemption rates jumped to around 50% by December 2021, a substantial increase from the 20% seen in the prior year. But the space economy in particular has suffered a worryingly large average redemption rate, leading to diminished proceeds for sector participants like Virgin Orbit (NASDAQ: VORB).
From a SpaceNews.com article, “According to a U.S. Securities and Exchange Commission (SEC) filing, holders of 23.1 million shares of CF Acquisition Corp. V, out of 31.85 million outstanding shares, elected to redeem those shares.” This disclosure is problematic, which may have gotten the gears to turn to convince Liberty Strategic Capital, a private-equity firm established by Steven Mnuchin, former Treasury Secretary under the Trump administration, to invest $150 million into Satellogic.
Obviously, the deal helped enable SATL stock to enter the market after multiple delays voting for the merger. Still, such circumstances are not ideal for a new listing, thus requiring extreme due diligence.
Easily one of the most exciting industries on paper, several high-profile institutions have issued their projections for the space economy, ranging from $926 billion on the low end to several trillion on the high. Potential? Space has bucketloads of it. Indeed, considering that the universe is expanding, the ultra-long-term potential for the segment is infinite.
Even on scales that mere mortals can tangibly appreciate, Satellogic presents an enticing narrative. Per its Jan. 18, 2022, filing with the SEC, the company projects to have 202 satellites in orbit by 2025. Further, it anticipates revenue of $480 million in the same year.
While intriguing, the above stats represent a notable downgrade from the 300 satellites it planned to send into orbit by the same period, according to a July 2021 investor presentation. Moreover, the revenue projection at that time was $787 million. Therefore, investors need to be careful about a company that’s downgrading its potential before even taking off.
How to Buy Satellogic IPO (SATL) Stock
Those interested in Satellogic must acquire shares at the open, necessitating knowing how to buy stocks. Below is a quick refresher.
Step 1: Pick a brokerage.
With the best brokers competing on similar terms, focus your time on finding the platform that ideally suits your needs.
Step 2: Decide how many shares you want.
IPOs are risky, and the space economy is proving downright treacherous. Therefore, elect a balanced share count.
Step 3: Choose your order type.
Before trading, learn these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
SATL Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.
Unfortunately, no pre-IPO opportunity is available for SATL stock.
Screaming — But for Joy or Terror?
Because the emptiness of space features no air, soundwaves lack a medium to travel. Cynically, such an ecosystem might work favorably for SATL stock, with the investment specifically and the underlying sector broadly suffering from headwinds. An opportunity may be available, but investors must exercise extreme care and discretion.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.