Main Engine Cut Off - T+209: Off-Nominal 50 (with Michael Sheetz and Eric Berger)

Episode Date: February 25, 2022

A special feature of a very-MECO episode of my other podcast, Off-Nominal, that I did this week with Michael Sheetz of CNBC and Eric Berger of Ars Technica. If you have yet to check out Off-Nominal, find us on YouTube or wherever you get your podcasts.This episode of Main Engine Cut Off is brought to you by 40 executive producers—Simon, Lauren, Kris, Pat, Matt, Jorge, Ryan, Donald, Lee, Chris, Warren, Bob, Russell, Moritz, Joel, Jan, David, Joonas, Robb, Tim Dodd (the Everyday Astronaut!), Frank, Julian and Lars from Agile Space, Tommy, Matt, The Astrogators at SEE, Chris, Aegis Trade Law, Fred, Hemant, Dawn Aerospace, Andrew, and seven anonymous—and 749 other supporters.TopicsOff-NominalEpisode 50 - Was That a Bake Sale? - Off-Nominal (Show notes)Episode 50 - Was That a Bake Sale? (with Michael Sheetz and Eric Berger) - YouTubeOff-Nominal - YouTubeSubscribe to the show! - Off-NominalThe ShowLike the show? Support the show!Email your thoughts, comments, and questions to [e-mail] @WeHaveMECOListen to MECO HeadlinesJoin the Off-Nominal DiscordSubscribe on Apple Podcasts, Overcast, Pocket Casts, Spotify, Google Play, Stitcher, TuneIn or elsewhereSubscribe to the Main Engine Cut Off NewsletterBuy shirts and Rocket Socks from the Main Engine Cut Off ShopMusic by Max JustusArtwork photo by ULA

Hello and welcome to a special episode of Main Engine Cutoff. I am Anthony Colangelo as always. I want to do something fun today which is air an episode of my other podcast, Off-Nominal, here in the Main Engine Cutoff feed for a couple of reasons. Number one, my co-host Jake Robbins was traveling this week so I was in control of Off-Nominal, which basically turned it into a casual boozy version of Miko, to be honest. I had Michael Sheets of CNBC on and Eric Berger of Ars Technica. We talked about the finance side of space, a lot about Virgin Galactic, a lot about the suborbital tourism market, a lot about SPACs and how the public companies are

playing out in the market today. And then we got into some of the recent developments in Ukraine. And it was an awesome conversation. It felt very much like a Miko episode. Sorry about that, Jake. But I thought it's worth, if you're out here listening to Main Engine Cutoff and you don't listen to Off Nominal, this is a show that I would really like you to hear. It's content that is very relevant to what you're looking for on Miko. And I feel like it should go into the canonical state of content on Miko. So I would, uh, like to put that in front of you. And also if you have not checked out of nominal yet, I really recommend doing so it's a fun show. It's a very casual show. Jake and I crack open a beer or make a cocktail or have a glass of wine and have a more casual conversations with people in the space industry, people that work on

missions, people that write about, uh, the space industry, other podcasters, a whole host of people in the space industry. It's a lot of fun. We do the show live on YouTube. It is a video show. You can find us at youtube.com slash off nominal. But we also do publish the audio to the podcast feed that you can find wherever you're listening to Main Engine Cutoff. Just search for off nominal.

And it's a weekly show every Thursday at 4 p.m. Eastern. Catch us live if you'd like to participate. But anyway, this is just a conversation that I think is really worth you listening to. And if you have not checked out Off Nominal yet, please check us out. Offnom.com is where you can find us. And I hope you enjoy this show. TLS is go for Main Engine. Start. Go at throttle up. Negative return.

And we see a nominal MECO. Welcome to space. Hello friends. Welcome to off Nominal. I'm pushing too many buttons at the same time to prepare a good intro, because usually Jake does it while I'm pushing the buttons. So here we go. Michael Sheets, welcome to the show.

It's been a long time that you've been on our list, so it's good to have you here finally. Yeah, thanks, guys. Heck of a day to pick for a podcast. It's a very light news day in the world, so it's good that we have our very regular friend Eric Berger back. Booked like yesterday because of scheduling snafus. So how's it going, Eric? We dropped everything in the world to come on with you. It's good to have you both here.

I don't know, man this everybody needs a little distraction but also not so we'll see exactly where we end up on this conversation based on what's on our topic list there are many variables at play but one constant is uh the drinks that we drink on off nominal this is like three hours long, right? Yeah. I'm drinking a Brotherton IPA that I've never had before. It is from, much like myself, it is grown in South Jersey. My sister brought it over to my house, and I have not drank them yet, so I'm trying them out for the show.

Did you guys bring anything fun? I'm trying to stay hydrated and sober, so I'm sticking to water right now. You got something going on later or what? I mean, there's still some news floating around. But normally I'd probably be drinking a nice IPA as well. We have a lot of good craft breweries here in Brooklyn, so I'd love to tap those. I'll have one the next time I'm on. Yeah, exactly.

Or later tonight once everything is sorted out with what you're posting. Eric, got anything good? I still have writing to do today, but it doesn't matter. I've got a local beer, Carbock Love Street, because I think the world needs a little bit of love today. So yeah, brewed in Texas, and it's good. It's not an IPA, but it's good. All right, let me look at my topic list here,

because I'm struggling to figure out where to jump in on all this. But there was, I don't know, do we want to start with some Virgin Galactic stuff? Yeah, it's news of the week. Yeah, that seems like a good one. So there was a couple stories, right? There was price increase, and that was a couple weeks before their earnings results. There was this earnings call later that maybe brought some of their projections into real world talk. And I would like to maybe talk about the convergence of projections when they went public to where they are now. But what was the,

what do you make of the overarching storyline there, Michael? I think the biggest thing is, and what they emphasized is that they said they're still on track with the refurbishment process, because at the end of the day, if they can't fly Eve and Unity and they can't get those you know back in the air that's the first obstacle then towards getting towards really their business plan in a lot of ways which is flying regularly but they have to get them back off the ground first and maintaining you know pace towards getting that done in Q3, what is pretty big for them.

I honestly was ready to go in case they announced it was going to take them longer than they expected because we've seen delays. They already had pushed back the Unity 23 mission to move up this refurbishment process. But I think underlying also was the fact that the cash burn last year was significantly lower than the cash burn in the previous year. So you look at 2021, you had $355 million in total costs versus $645 million in 2020.

So that's another big thing they need to manage right now to try to get some of those projections into a more realistic light. And at the end of the day, I mean, they talk about being free cash flow positive by 2026. That doesn't happen if Imagine doesn't come online. That doesn't happen if Delta has issues with development and manufacturing. And so those are just further hurdles. But the biggest thing at the end of the day is they need to get back in the air. They want to show people, hey, we can really start to do this more regularly i think you're doing flight rate math eric weren't you doing that last week i think i saw some math from you i i think you could have

stopped your cash flow positive analysis that that doesn't happen um michael but um first of all let me just ask you a question on sort of getting back to flight this year. Do you think that they get Unity 23 off? And do you think they actually get to commercial operations this year? Because fourth quarter to me, when a company starts talking about fourth quarter, that always means the next year. I think that's a fair question. And I think I can see a world where unity 23 gets up this year i i personally i would see it as pretty optimistic to then go from unity 23 right in the commercial service and that's just

based off a historical precedent you know how quickly have they been able to turn around missions in the past if they get unity 223 done in q4 that'd be great and that'd be you know helpful for their long-term. But I mean, to your point about cash flow positive, I was doing the math, just kind of napkin math on how many flights they need to get and what they're projecting off of the current vehicles. And on the optimistic projection, I mean, Unity flying monthly, Imagine flying every other week, Delta flying weekly, you're getting to a $ million dollars of revenue kind of range uh on a year and they're getting the cash burned down but trying to get to a point of getting cash flow

positive also requires them hitting what so far are optimistic uh flight forecasts based off of just historical precedent yeah um yeah under their best case scenario, they're talking about 30 flights a quarter, I think, with the Unity and the second vehicle Inspire that they're developing. And again, you know, just given all the past projections, you know, you have to take that with really a grain of salt. You know, back when they went public, I think in 2019, they talked about profitability by this year or by last year, excuse me, by 2021. And now they've pushed that out to 2026. I guess my biggest concern, you know, with Virgin Galactic is, you know, it's a cliche to say space is hard, but space is hard. And it's one thing to have a flight rate of, you know,

every six months or every three months with a vehicle, which I think they can get to. But just sort of turn that to 10 and then to 100 flights a year. It just, you know, it took SpaceX 12 years if they get there this year to get to 50 launches a year of the Falcon 9. Now it's an orbital rocket. It's a little more complex, but it's not humans most of the time. Right. And so it's, it's, I just think, you know, it just seems really pie in the eye pie in the sky type, you know, analysis here by them to talk about if, if, if everything goes right,

they can get to profitability in four or five years when nothing has gone right, except that Richard Branson beat Bezos to space by a couple of weeks. I mean, for 20 years. So it really defies, it just colored me very skeptical that they get anywhere close to the projections that they talked about in this call this week. That's like a common thing that was going on in the past several, I mean, the SPAC era, right,

has been companies going public by way of spack having these pdfs out there that have like they're all just hockey stick graphs for how many launches they're going to do uh like what what is the situation there because there was i don't want to say like a crackdown on spacks but there started to be a lot of attention about the way they were being used and the fact that there weren't as much, there wasn't as much rigor applied to the investment documents that were put out around those acquisitions by the SPAC of the actual company. How does that play into not only like Virgin's situation, but most every space company that's went public has had this, you know, even Rocket Lab, to an extent, has had these projections in these documents that don't map to reality when, you know, us three read it or anything like that.

So is there a day when they're actually going to be asked about that? Or is it they're just going to keep kicking the can down the road saying like, no, no, next year is when it's three flights a month. Because that's the that's the concerning part to me is that it's like, oh, no, we're just around the corner from that. I swear the checks in the mail. we're just about to get there. I think at the base level, there's kind of two factors. And both are not unique to the space industry, especially in regards to the SPAC craze. One is that growth stocks were just the hottest thing ever for the last three to four to five years. And it was seen as a like, it doesn't matter if you can't show profitability now.

And the joke in many ways in the marketplace was it's better if you're burning lots of cash right now and are, you know, deeply in debt and have these long term projections because you're seen, you know, more optimistically. You're seen as there's more hype around you, et cetera. And that's not exclusive to space SPACs at all. And secondarily, with the space SPACs is that you can put out those projections and raise money off of those and investors were willing to fork over the cash. So that capital on the investment side still was was coming around. I think the interesting thing has been the reckoning in the last six or seven or eight months that we saw a big slowdown in the number of SPACs that were getting announced, the increased regulatory scrutiny around them.

And so there's this kind of a pause happening on that whole what was almost under 12 months of a SPAC craze, if you will. will so i i think that's probably the most fascinating thing to me is that space because it was an interesting you know speculative play was another arena that fell into the hey let's get excited about how these companies can do in the public arena look how great everybody else's growth stocks are doing uh why not this company why not you know the next company so but at the bottom line and i think this is the message that all investors should take regardless of a space back or however mechanism someone goes public you have to look at historical precedent you have to look at current underlying revenue just how solid is their base right now versus those projections and you can even take those projections completely

out of the equation and get a pretty strong idea of the company's fundamental strength and position right now versus what it's trying to achieve and go, is this a company I want to invest in today? Or is this a company that I hope succeeds tomorrow? Because one is a pretty decent sounding idea. And the other one is, frankly, like a bit of gambling money more than anything else. So there, if you want to look at revenue, their revenue in the fourth quarter was $141,000. But it's like, what was that a bake sale? Like, what was that? I guess the mechanism, I guess the mechanism, Anthony, to answer your question is through shareholder lawsuits to get the reckoning or the answer to those questions. And we saw that Astra is now the subject of a lawsuit.

I don't know. Has anyone sued Virgin Galactic yet? I believe there was a class action lawsuit a year ago. I'd have to double check that, but I'm not off the top of my head. Okay. But I think a lot of those details will come out in that. And it's been interesting, too, to see the announcements this week by Rocket Lab, right?

Hey, look, here's a second spaceport. Hey, look, we just signed a $143 million deal with MDA to help build satellites for Global Star. And their earnings call is Monday. So what does that tell you about the earnings call on Monday? you about the earnings call on Monday, that maybe there's going to be some pretty bad financial numbers in there because they're trying to sort of spotlight on these other achievements to sort of, you know, draw attention away from the negative revenue numbers. I think that really is, I think Michael made a great point that almost all of these companies that win SPAC have terrible revenue numbers in terms of the amount of money they're bringing in versus the amount of money

that's going out. And so if you're investing in them, you're betting on a future in which they make money. And I guess, you know, to come back to Virgin Galactic, I think my biggest concern about them is that even in, you know, a Goldilocks scenario where everything goes right, you know, they're kind of going to have to be really lucky to be cashflow positive in five years. And it's just, things have not gone right for that company since, since history. And so it's just think that that's going to change now as they get in the really complex part of, you know, Peter Beck and others have said this, Elon Musk has said this, like, it's a lot harder

to build many of one thing than it is to build one thing. And so they've been for a long time, built one spaceship, right? And have flown one spaceship. And now they want to, you know, build three or four and fly them much more frequently. I think the challenges involved in that are even greater than the development work that went into VSS Unity. And so, you know, to sort of wave your hand and say, we're going to have this Delta class of vehicles and they're going to fly once a week. And it's just, that's not how it works, or at least that's not how it really ever has worked. Didn't they float that Delta would also be like a point-to-point travel system?

That was Chamath, I don't know his name. I can't pronounce his name. Oh, Chamath Palipatia. Palipatia. Palipatia. That was him. He was that was i don't know his name i can't pronounce his name paul patia paul patia that was him he was going around who's bailed at this point so yes oh yeah he and he and brandt is branson completely out too or does he know he owns like 11 i think so he owns like a percent that if you drank a beer that percent it would be like a pretty solid pretty solid drink you know i'm not there yet i'm there yet, but I'm working on it. But maybe by the end of the show, we'll be ready for some really wild beers.

I'm going to only drink beers that map to the percentage of Virgin Galactic that Branson owns. And it'll just like slowly work my way to Utah beers. Okay. So he was, Palo Pataya was making that prediction back in 2019 to kind of goose the stock. And I think, that's Eric Berger talking that, but like there's no way that they get from here to there with any of their

technology. So, so it just seemed like that was sort of like, this is the grand vision, but there's no way. Well, that was also when Starship point to point started being a hot topic and that was a thing that was attracting attention. Yeah. But DOD has put money into rocket cargo. For sure. Well, no, but I'm saying there's words that attract attention. Point-to-point was attracting attention. Now you just say hypersonics

and people throw money at you. That was like the answer to the plan that you can't scale past this technology when in fact, oh yes, we're going to be doing Virgin supergalactic, you know, point-to-point transportation. I mean, come on. That sounds like a college football ball, for sure.

Yeah. The other aspect, though, to the flight rate increase is that that assumes that they have a pretty good handle on what it costs to fly regularly. And that's a leg up that I think Blue Origin has on them right now that even if they haven't been flying humans on every flight they have been flying a lot of flights pretty regularly and they're getting more regular as they go so they have a much better sense for what it costs to scale up than virgin does at the at the moment and especially when they talk about um virgin galactic going to other places flying a spaceship out of dubai Dubai or Italy or whatever it is that are operating like these other installations. So like, I just struggled to do the revenue math when it when

the expenses are, as of yet, like, you know, somebody's doing the projections on that. But I'm not confident in jumping from one flight a year to 10 and having a complete handle on exactly how many millions that costs. I'm curious, Michael brought up the fact that their losses were down considerably in 2021 versus 2020. And I was interested in that. I'm curious why you think that is. Did they lay off a bunch of people like or do you know? I think for most part, it's coming from like a scaling down on the development costs. But if you look back through their cap table in the previous years, it was more shifting into this sort of start of an operational phase, even though we're still not really done with development

in a lot of ways. And I think that's the underlying other issue too, is you look at the pro forma cash, right? So cash and debt that they have on hand, they just had this debt raised recently, $1.3 billion, which is a lot of money to have available for your uses. But that's in terms of just their burn currently gets them like roughly four years of runway. And so that's, you know, significant of runway, especially if you compare it to a lot of other companies that are in the kind of scale up mode, but they're to have to spend a lot of that money on developing this new Delta class if they're going to get to a point of meaningful revenue or regular flights. So it makes it just even in, like you said,

a rosy-eyed scenario, it makes it really, really tight. But I think at the end of the day, we could easily see that development cost go back up in the next year or two. Yeah. see that development cost go back up in the next year or two. I'm not pumped on where Virgin's heading at the moment. I've never been big on their strategy or architecture and I just

I don't know. The other aspect is that if like Blue's hitting the market big time now. They're flying regularly. They're booking flights they're making headlines um i don't take it jeff is opening hatches he's opening hatches they're ringing bells yeah 14 people to space last year i mean that alone is impressive right it's impressive yeah but the other aspect is that like i don't expect any of the early ticket

holders on virgin to have... They're not price-sensitive enough to that they're going to jump to Blue Origin, nor does that seem like the cheaper option at the moment if people are paying $28 million for a seat or whatever. But the new customers that Virgin's hoping to sign up, the people that would be at the end of that list that would fill out, if they were able to fly 100 times a year, they've got six years ahead of them, the people that would be buying flights in the seventh and eighth year are probably going to be buying blue origin flights a lot sooner than that just based on current flight rate

and current backlog so that seems like even a bigger threat than like their development aspect is that the competition got online a lot quicker ramped up a lot quicker than anyone was expecting the thing that's been really fascinating to me is that executives from both companies have for now years have always said that this is a supply constrained marketplace. And obviously, you know, they want to say that to make the space towards a market look like there's this huge potential there, especially from a galactic standpoint, selling to, you know, investors in the marketplace, not so much applicable for blue. standpoint selling to you know investors in the marketplace not so much applicable for blue but that's been fascinating to me is that one CEO or one

executive from the other hasn't been like hey here's why we're gonna capture more of the marketplace than the other company because they're head-to-head competitors in suborbital tourism even if the idea of the exact process is significantly different so it's been fascinating to see that they see it as very elastic so far, and that they can have a lot of flexibility in there. But yeah, I think that Blue Origin, if they continue to really stake their claim and say, hey, we're doing this two minute space flight experience,

you can go up and float in orbit really quickly, it starts to eat away. And I wouldn't be surprised if people who have the Virgin Galactic reservations fly on Blue Origin before they fly with Galactic, just based on how many people flew last year. The thing that'd be interesting is I would be shocked if a lot of those people who have reservations with Galactic and decide to fly with Blue actually try to sell their ticket back to Galactic. I wouldn't be surprised if a lot of those people who are kind

of those early risk takers wanting to get all the experiences and adventures they can would be like okay cool i'll do another one it's just adding to the list yeah you i mean jared isaacman is a good example of this like once you get bit by going to space you're probably want to go back kind of soon yeah radioactive spider of orbit so So, I mean, I think it's going to be supply constrained for a long time because Blue Origin or Bob Smith talked about building a second New Shepard capsule for humans. And so, you know, let's say that comes online in year two. There's still, you know, let's say they do 20 flights a year. That's 120 people yeah i mean that's that's that's not putting a dent i think in the thousands of people who are willing to pay mid to high six

figures to go to space for this kind of experience especially as more people do it they'll see that it's safe it's fun um and and you know it's it's not it's not it's not like you don't have to be physically you know healthy for it i mean you just't have to be physically, you know, healthy for it. I mean, you just kind of sit there and float around. So, I mean, I just think we're going to be supply constrained for a long time. And I don't think Blue Origin, it's necessarily that important for them to build a fleet of like 20 new Shepherds, although they could, and to meet that demand. And I don't think Virgin Galactic can scale up to meet that demand either. So it's like, I just think we're going to be able to have much more demand

than supply exists until at least Starship gets flying on these Suburbia planes. Did you guys watch this Dylan Taylor video, by the way? Yeah, the full thing, end-to-end was it was really you know fascinating because it gives you this idea of truly what that experience is like from the inside i mean you all get glimpses of on the webcast but to actually see the whole process and you know how they get in and out of their seats and and you know what it was really like for everybody for the whole flight and then i mean yeah it's it's a it's a it's a, it's a cool video. I'm

glad Dylan posted it. It is the greatest marketing material because, uh, I was struck by the fact that nobody freaked out at any moment. Like there was, there was no moment where people had fear on their face. There was, you know, the moment where they get separated from the vehicle and there's a huge jolt, the shoots come out huge jolt, but otherwise they're having a great time. And I kind of expected there to be more like, you know, normie person freak out on spaceflight. I don't know. Maybe I was wrong in thinking that, but I was just I was struck by how normal it looked. It looked just enjoyable. I would say this. I think the engineering of Blue Origin is first rate.

The engineering of Blue Origin is first rate. And it's clear that the New Shepard system is probably about the most elegant solution you could have to a suborbital space launch and landing because it is so smooth. And it has been so successful since that first failure they had when they were unable to recover the rocket. They've recovered everything every time through some pretty dynamic tests um so so yeah i mean it's designed it's designed to be that way and the fact that it's fully autonomous and so forth it just it seems like a really kick-ass you know launch system um you know my problem is that you know it still costs seven figures to go and they're only only going to probably fly maybe 10 times this year. The only other SPAC-related thing that I wanted to talk about is what to do about launch companies that are public and attempting to launch a rocket. Because there's been some really haywire stuff.

to launch a rocket because there's been some really haywire stuff uh astra in particular had their first launch out of cape canaveral and they uh what was it the the last second abort uh yeah cause their stock to drop i'm pulling up your article to figure out how much it was it was like 15 or something uh just from having a t0 abort right what do you make of of that situation number one why does a company like this go public and what do they want of of that situation number one why does a company like this go public and what do they want out of that is it just the money or are there more reasons to be a simple question but no no i'm layering it all in public marketplace i love it uh no so i i'd say on the broader question of why go public i mean the fundamental basis in a lot of ways is ability to raise capital one on the actual you know ipo or in this case

through the the spacs pipe and and the the shareholders the spac already raised money from but then secondarily once you're in the marketplace you can raise uh equity capital pretty pretty effectively through sales of equity so that makes things a little quite a bit more liquid quite a bit stronger in terms of you of the foundation of the company. Now, the reason I would definitively cite to a lot of the trading you see in these tens of millions uh you know for what they are expecting in this next year versus you know say what spacex probably brought in for falcon 9 launches last year which is in the billions right so you're looking at a big difference in just the foundation underlying company and therefore people trade pretty volatilely off of that

speculating as they say in the street to say hey I think it's gonna go sharply this way and they're not making a long-term bet on the company they're just trying to say hey how can I play this and then you get these catalyzed momentum trades where all of a sudden it's swinging hard in one direction or not and it can significantly exaggerate a situation where you know folks in the industry and I think and even on on Wall Street would look at a launch abort and say, yeah, we understand this isn't the end of the company. It didn't blow up the rocket. There's no huge infrastructure loss there. But, you know, it does look like there's an issue. It does look like there's an unresolved problem that they need to identify. And that's something that can spark that

sort of speculative trading, and it can get exaggerated for sure. I mean, that's very well said. I think you're right, Michael, that people are trying to sort of trade, day trading sort of on these momentum swings. But I think a bigger issue is that generally people don't really understand the industry that they're investing in to some extent. I mean, because the fact that it's a launch abort due to range issue is not a big deal. It doesn't tell you anything about the capability of Astro.

The fact that they were able to recycle pretty quickly, I think, is a positive story. The fact that they lost a rocket is a negative story. So it's just, you know, and they're going, these companies are going public for the money. I mean, they need the money, right? It's building a rocket and launching it is enormously, you know, cash intensive, and they're not getting money back, right? I mean, who, they're getting what a couple of million dollars maybe in revenue for a launch and they've launched one successfully and they've spent probably 100 million or 200 million dollars. Who knows? Now an unnamed acquaintance who we all know is telling me I should say bad things about

Chris Kemp. I'm not going to do that. It's like a riddle. Michael and I are like, who could that be? But the CEOs are out there sort of promising these big returns and sort of to try to get investor money. But the fact is these are not really money-making ventures. Like a small launch company, has a small launch company ever made money?

Can you think of anything? You might want to drop the word launch, or small, I mean, not launch. Has a small company made money? Yes, launch. Has a launch company made money? Can I not say small launch? No, no, I'm saying drop the small.

Right. Has a launch company ever made money? I mean, yeah, it's a great point. I mean, unless you are backed by an institution, like Ariane's is backed by Europe. ULA was backed by the Department of Defense. I mean, the margins are so slim that it's just hard to get that revenue. And so, you know. slim that it's just hard to get that revenue. And so, you know. If SpaceX could do Mars with launch revenue, they would probably not be trying to operate a satellite internet constellation.

Yeah, I think that's fair. And Rocket Lab wouldn't be buying every satellite component company, you know, this side of the Atlantic. Yeah, exactly. I think it's always funny to me that if you look at a graph of the overall space industry, I mean, you're talking industry that's nearing globally, like $400 billion in revenue a year. And you just carve out the launch like sliver, you can hardly even see it on the pie chart. And that's a testament to how slim those margins are. And where, you know, I think we've talked a lot about this in the recent weeks the diversification

of launch companies not even small launch i mean spacex is a great example with you know growing into starlink and moving outside of that into these other broader businesses you know rocket lab with the space uh systems division and the acquisitions that they've made as well so it's it's a fascinating function i did want to revisit one thing because I do believe, and I've been genuinely surprised over the years, that the street is fairly well educated on the space industry.

I think part of it is a testament of the fact that for a long time, defense stocks have been something that a lot of institutional money and others have been involved in. So they understand some of the basic risks and principles that are under here. I think that it's very fascinating to have seen with launch companies that succeed in a launch. So a great example would be Virgin Orbit's recent mission.

And they make it to orbit that there's a sell off in in the stock in the you know day of or day following after a successful mission and it to me i you know i haven't ever found anyone who's done the historical analysis of it but in a lot of ways it goes back to an old wall street adage of buy the rumor and sell the news people buy the hype before the launch and you know the stock runs up a bit and then they sell it after it's successful uh obviously that then the sale can go sideways as we saw with astra and how hard it can hit when that launch fails mid-flight but that whole you know by the launch sell the success to orbit in versus by the rumor sell the news has been an interesting idea that i've been kicking around for the last couple months with these guys now public. Yeah, Virgin Orbit, right? They rolled a mock-up up to Times Square and their stock was

going up much more than when they launched. So I think that's a good example of it. Well, and that's a good example of where you get a lot of excitement here in New York around the idea of, you know, they were ringing the NASDAQ bell. It's a publicity thing where a lot more people are now aware of your organization because of something like a publicity stunt of rolling a rocket into Times Square, which to be fair, I will say logistically, that was very impressive. And just even that the city signed off on them doing that without engines stacked in the back of it, even alone, just a plastic case, I was like, all right, you put this in Times Square. I respect that. Paid for parking, too.

It's very expensive. Yeah, trust me. Hey, I mean, they're 20 years behind SpaceX who put, sent a Falcon 1 to... To the National Mall. The National Mall. Yeah. And that one was not as streamlined looking.

That was a little more hodgepodge looking back in the day in Falcon 1. So I give them credit for looking like people that just home built a rocket and rolling it in there. Do we want to go into Firefly? Because I would like to maybe talk about Firefly. Well, there's already more Firefly news today. That's what I was about to bring up. Yeah. So there was this thing from what? Was this last week when Polyakov said that he was selling all of his stock or all of his stake for $1?

I've heard people that would know say that that's not something that they would put a lot of weight in, that that was not a very accurate Facebook post. Shocking. Shocking news that that is. Shocking, shocking news that that is. So now AE Industrial Partners, who I think the last time they were in the headlines, were putting like a billion dollars into Sierra space. Yeah, one point more into Sierra.

Yeah, so they're not really kidding around trying to get into space. We don't know the amount that they're buying the Polyakov stake for. I heard a rumor it was $1. Spread disinformation on facebook yes so man i don't know which angle we want to start from this whether it's interesting that somebody did buy firefly steak or whether uh do we want to dredge into the topic of whether the Committee on Foreign Investments is looking a little better as Russian troops roll into Ukraine, that they were concerned about the Ukrainian wing of the company, which was cited as a big reason that that whole thing unraveled for Firefly? I've also heard that's overheated, so I don't know if anyone in particular has opinions on the Polyakov of it all.

I've talked to Polyakov one time before, and it was an interesting interview. But Ashley Vance, who wrote the Elon Musk biography, who I know fairly well and respect, and we talk from time to time. He's got to know Polyacrop pretty well and he thinks he's gotten kind of a raw deal. And so I'm inclined to trust him on that to say that he kind of did get jerked around in this whole process. But it's very opaque from the outside. You know, I don't have great sort of optics into, into that whole financial situation. And I'd really be interested to know how much was paid by this hedge fund as

well. It always concerns me a little bit when hedge funds are coming into a company trying to extract value because right now there's not, it doesn't seem like there's a lot of value to extract from, from Firefly. It's not like a newspaper where you can cut staff and raise subscription prices and sort of get more revenue out of it. There's not like a newspaper where you can cut staff and raise subscription prices and sort of get more revenue out of it. There's not much revenue coming in. So it's going to be really interesting to see. I mean, I think the good news here,

I take away is that there is a resolution to this issue. And Firefly last week, you know, put out that video saying that they had acceptance tests in their first and second stages for flight two. And so I think they still have a path forward. If they could get Alpha flying, they've got their Blue Ghost lander that I'm told the work has been proceeding on all the while throughout this whole process and that they're sort of keeping their schedule on that. So I'd like to think that this company that's been through a lot, right? Marcusek, you know, came here with some baggage from Virgin Orbit, and then the company went bankrupt, and he found a backer in Polyakov, and then Polyakov's, you know, ties to Ukraine

really dragged the company down. It would be great if they could sort of still come out of this with a usable rocket and a lunar lander um it just seemed like that opportunity is still in front of them with with this this now being resolved polycom stepping aside and some private money coming in i think it's a fascinating story because alpha got off the pad at vandenberg yeah they had an issue with the engine but But I think it's like how we'd be talking about Firefly would be significantly different if they hadn't gotten that, you know, stood it up and got it off the ground. And it's one of the things that we come back to in the industry, which is that like renders and, you know, showing off bits of hardware and all sorts of different things are interesting. But showing a completed product is such a whole different ball game and and the fact that they even though they didn't make it to orbit uh they

did so much along that way and i think it makes sense why someone like a industrial private partner is a private equity fund who has had this track record so far of investing in space companies for the long term making these like big long-term bets um that they would look at firefly and say hey here's an asset that's being very undervalued by its existing shareholders because they're effectively being pushed out as far as we understand and uh it's a company that's proven they are a significant way along the way. Now, do I think the second launch of Alpha is going to make it to orbit? Like, we got to see if that works or not. They're still in that, like, late development test stage.

And I think that's still the biggest thing for me before we talk about, you know, Blue Ghost and their other projects. But it's really fascinating i mean ae is not someone who messes around when it comes to investing space money i mean i i anthony i've heard good things about their technical people um and their their approach i mean i you know like i said i think it's hopeful um that that that they's hopeful that they have a path forward, and now they have a chance to go execute. I think that's good for the engineers.

That's where I'm at with Firefly, because you look at that section of the launch market, it's like the one-ton-to-orbit range. ABL is kind of the dark horse here, that we don't know exactly what's going to happen with them. They seem to have a lot of financial backing for a variety of reasons. They're basically going to be a one-ton version of

Astra who's got a couple containers. They can fly anywhere and then launch from anywhere. Relativity, oh, I'm knocking my mic around. Must have drank too many of these beers already. Relativity is going to get distracted by something else. I'm convinced of it. Eric, you had a great piece

on their plans for turn one my thing with them is that always that they are a they are an additive manufacturing company who happens to do launch services not a launch services company who happens to use additive manufacturing i think they're going to get distracted they're going to sell to somebody they're not going to be in the launch game for a long term is my bet on them so being able to drop in on firefly who's like gotten the the most gnarly things out of the way of actually building a rocket setting up a launch site and and they are in that you know we could probably use the software uh development idiom here that the first 90 takes 90 of the time the last 10 takes the other 90 of the time they The last 10% takes the other 90% of the time. They're in that part now. So that might take a couple launches,

but like that's not a bad situation to be in. That is a much stronger, and they have like a good product at what sounds like a pretty good price. They've got a lunar lander contract from NASA. I'd rather be them than Virgin Orbit, to be honest. I'd rather be them than Astra. So I don't think it's a bad idea to jump in on firefly if

you've got the kind of cash that can that can do it you know it's interesting you talked about the one ton class market it does seem to me like relativity is running away from that class vehicle as fast as it can to get to the meet the sort of quasi medium heavy lift you know with the with terran r so you say running away from that section of the market, and I'd say putting more time in front of them to work on their printers and get acquired by somebody else. You know, you say that, but they have some really good rocket people there.

I know, but that's, I don't know. I'm just not, I'm not buying it. I'm not buying the fact that they are not a manufacturing company. I'm buying it. Although, I mean, I agree to the extent that they have ambitions beyond launch. I do think they view launch as sort of the...

If they can do it with launch, they can do it with anything else, and that sort of frees them to become more of a other things company. Okay, let me inverse it, and something that I know you and I agree on, that I think like Blue Origin, you and I both think we've talked about this on Main Engine Cutoff that they should run away from launch and do everything else that's interesting in the market. I think Relativity, we're talking about how slim the launch margins are.

There's no reason that they could not be a very successful company not worrying about launch and worrying about any other kind of manufacturing. worrying about any other kind of manufacturing. So if they have the tech to make what is probably the most highest performing vehicle class that you can build in the world, which is an orbital rocket, like what can't you build if that's something that's within your realm? I think one thing that's really important to consider

when looking at relativity is vision and who is leading the company, who the founders are, who the top executives are. And at the very base of it is our people who are kind of, you know, the joke is out there that I've heard of RelativityX, right, where it's another company taking that SpaceX sort of idea of, hey, let's make life multi-planetary.

Let's, you know, go send stuff to Mars. I mean, Tim has talked extensively about wanting to ship 3D printers to mars so that we can print you know not just rockets out there but also structures and more so i think there is you know a valid point that they are a you know additive many x-raying company in many ways first but with this very central driving principle of of space flight and space exploration that as long as the current people are running the company the way they are I don't see that changing and I don't see them getting distracted in that way even if they might start to tack on other capabilities along the way I mean a

great analogy would be that Apple wasn't a mobile phone manufacturer in the 1990s right now look at what the iPhone does for Apple on a yearly basis in terms of revenue. So that's exactly the point that Apple didn't go and become a cell network operator. They took what they were good at and focused on that. So if I'm relativity, I'm betting that Starship or something else is going to work out that makes launch cheaper than we could quicker than we could. And I'm going to build the product that needs to be launched by that thing when it is very cheap. And that's the fundamental issue that I think their timeline doesn't map to what they could take advantage of if they focused on the other parts of their business first.

But their response to that would be there shouldn't just be one disruptive company in the launch sector. There should be at least two. And they think that they can be the other company and they can do so specifically by bringing this entirely new approach to manufacturing. Now, whether that's more efficient than building out of barrels of steel in South Texas, we're going to have to see. But, you know, it's it's I agree. I actually agree with Michael. I thought he said it very well. I think, you know, Tim Ellis is pretty committed to this this kind of thing. He certainly sounds convincing when I talk to him. He's convinced a lot of big investors. He's convinced a lot of big investors,

people certainly that are smarter than me. But he seems genuine to me in the dozen or so times that I've talked to him about this stuff. Who knows? Maybe I'm getting bamboozled. It's happened to me before. So the slightly related Firefly topic would be if we want to delve into what the hell is going to happen to the ISS,

this would be the time to transition into that. What the hell is going to happen to the ISS? It's going to keep flying. I like how you went from Firefly to ISS. Ukraine gets us there. That's a one-stop shop. It keeps flying. I think it has to be a shooting war between the United States and Russia

before that partnership ends. I'd say that even with Dimitri tweeting the way he has today, the fact that NASA's boilerplate statement hasn't changed in the last 24 hours about, hey,

continuing cooperation with all of our international partners, yeah, like, the status quo hadn't changed, and I think it would have to come down to, and I've been working on a story today, I spoke to Jeff Manber at Voyager Space at length on this topic, and he really made an excellent, excellent point, which was that the congressional scrutiny is the one thing that he could see dramatically changing it. Now, could Dimitri say something that gets more congressional scrutiny on board and starts to change that partnership? Yes, that's a possibility.

But also, you know, the situation in Ukraine could continue to escalate, maybe not even to a shooting war, but to a point where that scrutiny starts to get too hot and the gaze, you know, starts to say, OK, how do we divest from this? But, yeah, at the end of the day, the interoperation of the ISS means it's a marriage that we might not be happy with our bedfellows right now, but it doesn't seem like we're going anywhere. I mean, who are your people in Congress who are really interested in space? I mean, they're all pretty invested in the International Space Station. I mean, if you look back at when the Trump administration tried to talk about ending the space station in 2025, who pushed back hard? It was Congress. And so, I mean, there's there's just a lot of support in Congress for continuing to fly station to 2030.

They're going to I think that and I think they're willing to hold their noses to sort of continue to work with Russia and sort of hope that this, you know, this too shall pass. to work with Russia and sort of hope that this, you know, this too shall pass, that things could still go wrong. I mean, I wrote the other day that Dmitry Rogozin is definitely a wild card in all this, because he is clearly, you know, just way out there. I mean, he tweeted today, basically made the insinuation that Biden has Alzheimer's disease, you know, in his speech. And this is really counterproductive. But but you know nasa has overlooked a lot of shit that this guy has said before including blaming a nasa astronaut for drilling a hole in the soya's vehicle for for really bad bad reasons when they knew he was 100 percent lying so and and calling you a war criminal criminal don't and calling me a war criminal. And calling me a war criminal. Yeah, let's forget that.

Launched a thousand spicy memes, which I love them all. But, you know, he's... It's just, it's very hard to see that partnership ending. But, you know, we are in an extremely dynamic situation. And they could pull the plug from their side. We could pull the plug from our side. We could pull the plug from our side. I just think it's in both countries' interest to keep it going for now unless things get significantly worse. Yeah, there's two angles. One, it's not going to be NASA's decision

either way. They're going to try as hard to keep that thing together. It's either going to be the State Department telling them that they've got to sort something out or a sanction hitting in a way that impacts the station or Russia bailing. The other aspect is you're saying who's going to go in Congress and actually lobby for various things. The play, if you're trying to figure out how this situation could play out, is if your axiom space to spend a good amount of money with Ted Cruz to go in and get money to build modules for the ISS quicker. And that is a Texas company with a Texas guy who likes the space station. This is a chance to try to get funding. If you're Axiom, you need the space station.

Yeah, yeah. My point is go get money to build modules that you would attach to the space station as a hedge against what if ISS needs to be detached at a certain docking port. Their whole business is predicated on living off the space station for like five or six years before they separate. But if they were given a billion dollars to replace what Zvezda does for us today, would they take that? It would take them a long time.

Yeah, I don't think they're ready by 2024 if, you know, Roscosmos says, all right, we're not extending, even if it doesn't, you know, Roscosmos says, all right, we're not extending. Even if it doesn't change today in two years from now and Russia are like, all right, we're done. Like, I don't see a commercial company that would be ready to take on that task. And you're talking tens of billions of dollars to get something working with the current folks that are involved in this station. And I don't think Cruz cares about 200 employees at Axiom. I think he cares about the thousands, the 15,000 employees at Johnson Space Center

and contractors at Johnson Space Center. Yeah, that's a great point. I feel like there's a way to thread this needle and make it an official program that is the ISS security program is all I'm saying. And if there's an opportunity to do that. Yeah, I mean, we aren't in unprecedented times. I mean, if you would have said that what's happening

this morning, even with the annexation of Crimea in the back of mind, I would have said like, no, I think it's all a bluff. I don't think it's actually going to happen. But we have troops on the ground in Russia right now. I mean, that's a huge change for 24 hours.

I just think there's space for the same reasoning that led us to commercial crew which was we shouldn't be beholden this way we should have our own capability and if there's things that the iss cannot live without that are on the russian segment which is the case there's the same case to be made same reasoning that that there should be an official program that nasa is tasked with to replace those things or at least match them so that if it comes to that they're okay okay. Or it's an admission that the ISS doesn't matter as much as people think it does. None of that happens anytime soon. The point I think Michael and I are trying to make is that you cannot kludge up a solution and launch it in the

next two to three years. And you would have to believe that in two to three years, this Ukraine issue, NATO issue is going to be resolved one way or the other. And so sort of thereby rendering that move into some kind of hardware solution move. I do agree, though, that we are sort of in an unprecedented situation where the sand could change quickly. And, you know, we could, you know, we could lose things. We could lose the space station. I mean, it's not unprecedented that successfully ended on a downer note oh the one about European European human spaceflight would also be

an interesting tie in there as well Europe's increasingly interested in having their own human spaceflight program and that's kind of cool yeah they put out a manifesto the ass was, and by God they call it a manifesto, which I love. They're saying that this was basically the association of all European flown astronauts said that Europe ought to have its own capacity to get its people to space so that they can make sure that they have their own values, blah, blah, blah, support European industry and not give money basically to SpaceX I think was what they were saying.

And, you know, this was prompted, it's Joseph Aschbacher, the new director general of ESA, this is one of his initiatives. He would like to see Europe develop its own spacecraft, which would be fun to watch because, you know, it would take a decade and cost godly amounts of money um so I wrote a story about it and then Dimitri rogers and our friend tweets that story out like the next day and says hey um uh we could do a Soyuz from from French Guiana and uh and then and then I retweeted that and he was in like his the head of glass cosmos basically said I was a terrible human being, a liar. And, you know, you know, it was just said all these nasty things about me, which I thought was hilarious. But Rogerson did tweet that, like, they should launch Soyuz from from French Ghana, which is so preposterous that like Europe,

which specifically said it wants an independent capacity to get people to space, then would buy Soyuz or have, you know, rent Soyuz. I don't know how they would do it. Yeah, ride share. It's like an Uber situation. From French Guiana. I mean, it's just so preposterous. And then like three days later, rushing. Yeah, I think that sales off at this point.

I think that deal is not going to happen. Yeah, no kidding. It's just sort of, it's just – Rogozin is such a clown in so many ways. I mean, I clearly was just screwing around saying, hey, you guys should buy Soyuz when he knew there was no way that was going to happen. It's just – it's the Russian sense of humor or like like I don't quite understand the psychology of it. But but, yeah, Europe does want its own space transportation. The problem is, I mean, when you get to the European space politics, the basic thing to remember is, you know, they've got like a couple of dozen member nations of ESA. It's different than the European Union. There are people who are in ESA who aren't in the European Union and vice versa, for example, the United Kingdom.

And they all put money into ESA. And basically, however much money you put into ESA, you expect that proportion of money to come back to the industry in your nation. And so there'd be a huge food fight over who built the ECLA system for the spacecraft and who built the propulsion module. So this would be like a socialistic-type program, who built the ECLSS system for the spacecraft and who built the propulsion module and who, I mean, so like, this would be like a socialistic type program,

like an SLS type program that would take, you know, forever to develop. I think Rigaud doesn't just like trolling you in particular. Yes, he does. Yeah. I think you're his favorite character on Twitter. I wouldn't use the word favorite. Well, it's my favorite. It's my favorite Twitter drama. Well, you know, he said some pretty nasty things about

me in a Russian podcast once, which kind of scared me a little bit. Yeah, you shouldn't go to any more launches over there. I got to go in 2014, and yeah, I don't think I'll be going. That was probably it. I would recommend that. What else are you working on these days eric you got anything else cooking uh i mean it's just trying to keep up with the the the daily flow of news right i mean it's like

it's i don't know how you do it michael i mean there's just like when i first started covering space about 15 to 18 years ago it was quite boring it was just like nasa's space shuttle launches and a very limited amount of commercial activity and now you know nasa's got its art in this program you've got space station you've got commercial activity you've got governments around the world investing more and more money and you've got all this private capital flowing into space, there's just so much to track. It's, you know, it's just trying to keep on top of all that. Yeah, I think that's exactly right. I mean, I focus almost exclusively on the business side.

I kind of only ever dip my toes in the policy side that we've been kind of talking about here at the back half of the show and just on the business side, I mean, there's probably eight or nine stories a day that I could write, even that are just like four or five paragraphs explaining, you know, someone's press release in maybe a more tangible, understandable way or something like that. But like, yeah, there's just a constant flow of news. And there's days where I'm like, I could have written 15 stories a day and I published four and I feel like I'm going to collapse.

You know, it's absolutely wild. I mean, I have great respect for people who can, you know it's it's absolutely wild I mean I great respect for people who can you know really turn around stories at an incredible clip but um yeah and even now obviously we talked at the beginning of this about this fact phrase and maybe some of the hype and some of the dangers and risks people should be aware of but I will say from a the transparency standpoint as a reporter who's been covering business for a while, like the filings aspect of you have to disclose this. Hey, we have this new risk. Hey, there's a lawsuit, a class action lawsuit against us. Here's our response. They have to respond. They have to say something. That part of it, the transparency is so, so welcome.

And the access, more people saying, OK, yes, like I do want to invest in these specific space companies I think they're high quality names I'm gonna get behind them that's all good in the long term I I would not be surprised if there are some losers here in the next year or two you know companies that get delisted we saw one web already go bankrupt like but there are going to be winners and there is going to be this kind of momentum and i think in a lot of ways that momentum is at a point where it's not going to be stopped by anything short of like a serious economic crash in the united states like there is so much going now that's being become a robust industry that all of this in the long term i think is going pretty pretty nicely and trending upwards yeah it's a good spot to end it michael sheets cnbc is where you can find you uh the sheets

tweets with all z's i always like i feel like i always type something wrong in there the first first one is isn't this and eric burger what do you want to plug rocket report i want to say a couple things first of all i would i would i, I would just say Michael has brought a tremendous amount of energy into covering the financial side of space. That as sort of more private money comes into this is very welcome. So he does a great job. And the second thing I would say is just for fun, what I would love to plug is go to the Vaya space, V-A-Y-A space.com website, because they've, for some reason, waited three weeks to put out a news release

saying that they had completed a suborbital launch of their rocket in advance of... No, no, you got to do the launch. Go find the video. Is this what I'm looking at? Go find the news. Launch? Yeah, that's the correct website,

but go find the news. I don what I'm looking at? Yeah, that's the correct website. I don't know if I caught this one. Go find the news. Twitter? Are we going on Twitter? I don't know if they tweeted it. But there's a video. You gotta find the video. We really owe it to your viewers. Yes, go down.

Is it on this one? Oh, nice. I'm gonna go full screen on this sucker. I'm gonna narrate this for ya. Okay, I'm going to go full screen on this sucker. Oh, I'm glad. I'm going to narrate this for you. Okay, let's see it. Here, I'm going full screen. Look at this badass rocket taking off. Taking off.

There it is. It's going to clear the launch tower, and it's going up, and it's, it's, it's, it's, that's the end of the video. Go on. I did not see this. A couple things about this. This is the former Rocket Crafters company out of Florida. Oh.

And they did this launch January 29th from Mojave, and they waited three weeks to put out the news release. And the initial news release didn't have any photos or any video and so i emailed them i said um a you know can we get some pictures of video and b how high did the rocket go because it looks like to me in that video it went about 500 meters so but in the news release they talked about how this was a successful suborbital test and that it clearly sets them on this path to be forced to reckon with, go read it. And it's an actual quote.

And then that they're going to do an orbital launch in 2023. So, I mean, caveat emptor. A thing to watch. If it goes back, feel free to invest. Take your financial tips from one of these two gentlemen that are here with us today

i'm not allowed to not a chance um anyway people people enjoy that video i think yeah it's great and you can get content like that on the rocket report which is what i would recommend absolutely uh next week i've got a good one next week jake's gonna be back from vacation we've got scott tilly do you know about scott tilly the amateur satellite tracker that is you might see tweets from scott and he was one of the ones tracking changa 5 back to the distant retrograde orbit that it finds itself in in lunar orbit pre-empting artemis 1 uh so that's gonna be a fun one next week so i'm looking forward to that but thank you both for being here. This was awesome to hang out.

And I feel much better about today after talking to you two. So thanks for being here. Thanks for watching, everybody. We'll see you later. Thanks. Talk to you guys. 1, 2, 3, 4, 5, 5, 4, 3, 2, 1, end of test.