Off-Nominal - 50 - Was That a Bake Sale?

Episode Date: February 25, 2022

Michael Sheetz of CNBC and Eric Berger of Ars Technica join Anthony to talk about the latest in the finance side of space—what’s up in the world of funding, which businesses look steady and which look shaky, and of course, how you can’t spell space without SPAC.DrinksIPA - Brotherton Brewing Company - UntappdLove Street - Karbach Brewing Co - UntappdTopicsOff-Nominal - YouTubeEpisode 50 - Was That a Bake Sale? - YouTubeVirgin Galactic stock rises on ticket sales, $150,000 deposit newsVirgin Galactic has lost $1 billion during the last two years | Ars TechnicaChamath Palihapitiya steps down from Virgin Galactic boardRocket Lab Selected by MDA to Design and Build Spacecraft for Globalstar | Rocket LabBezos' Blue Origin building more space tourism rockets, CEO saysAstra stock drops 26% after NASA mission fails mid-launchRocket builder Astra postpones NASA ELaNa 41 mission after abortAE Industrial Partners Reaches a Definitive Agreement to Acquire a Significant Stake in Firefly Aerospace, a Leading Provider of Launch and In-Space VehiclesMichael Sheetz on Twitter: “Update: Private equity firm AE Industrial Partners is acquiring "a significant stake" in Firefly Aerospace from Polyakov, the companies announce, for an undisclosed amount.”Satellite imagery shows Russian attack on Ukraine from spaceDmitry Rogozin says he does not appreciate “openly hostile” US policy | Ars TechnicaRussia responds to European astronauts: We’ll give you independent spaceflight | Ars TechnicaFollow MichaelMichael Sheetz (@thesheetztweetz) / TwitterMichael Sheetz Profile - CNBCFollow EricEric Berger (@SciGuySpace) / TwitterEric Berger | Ars TechnicaFollow AnthonyMain Engine Cut OffMain Engine Cut Off (@WeHaveMECO) | TwitterAnthony Colangelo (@acolangelo) | TwitterOff-Nominal MerchandiseOff-Nominal Logo TeeWeMartians Shop | MECO Shop

TLS and go for main engine, start. 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. It's a heck of a day to pick for a podcast. It's very light news day in the world, so it's good that we have our very regular friend, Burger back booked like yesterday because of scheduling snafus so how's it going Eric we drop everything in the world to come on with you it's good to have you both here I am 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 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. Are you got something going on later? Or what? I mean, there's still some news floating around.

So, but normally I'd probably be drinking a nice IPA as well. We have a lot of good crap breweries here in Brooklyn. So I 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 a writing to do today, but, you know, it doesn't matter.

I've got a local beer, a Carbock Love Street, because I think the world needs a little to love. today so so yeah brood 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 the week yeah that seems like a good one so there was some there was a couple of 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 back in the air, that's the first obstacle then towards getting toward 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's going to take them longer than they expected because, you know, 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'll get 2021. He had 355 million in total costs versus $645 million in 2020. So that's another big thing they need to man. 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 going 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 if they want to show people, hey, we can really start to do this more regularly. I think you were doing flight rate math, Eric. Weren't you doing that last week? I think I saw some math from you. I think you could have stopped your cash flow positive analysis that that doesn't happen, Michael.

But 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 often? 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 to the next year. I think that's a fair question. And I think I can see a world where Unity 23 gets off this year. I personally, I would see it as pretty optimistic to then go from Unity 23 right into commercial service. And that's just based off its historical precedent.

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 progress. 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 $250 million of revenue kind of range on a year. And they're getting the cash burn down, but trying to get to a point of getting, cash flow positive also requires them hitting what so far are optimistic flight forecast 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 um inspired that they're developing and again you know i just given all the past projections you know you have to take that with really a 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 into 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 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 weeks. I mean, for 20 years. It just, it really defies, it just, it's color 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 SPAC, having these PDFs out there that, have like they're all just hockey stick graphs for how many launches they're going to do. Like what is the situation there? Because there was, I don't want to say like a crackdown on

SPACs, 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 Virgins 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, no, we're just around the corner from that. I swear the checks in the mail were 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, it's 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 spacefax at all. And secondarily with the spacebacks 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 coming around. I think the interesting thing has been the reckoning in the last six or seven and eight months that we saw a big slowdown in the number of specs 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 spack you know craze if you 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 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 the 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,

hmm, is this a company I want to invest in today or is this a company that I hope succeeds tomorrow? Because one is a, you know, it's a pretty decent sounding idea. And the other one is frankly like a bit of gambling money more than anything else. So they're, you want to look at revenue. the reverend in the fourth quarter was $141,000. 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 not a subject of a lawsuit. I don't know. Is anyone sued Virgin Galactic yet?

I believe there was a class action lawsuit a year ago. I have to double check that, but I'm not the top of man. Okay. But I think a lot of those, you know, details will come out in that. And it's, it's been interesting, too, to see the announcements this week by Rocket Lab, right? That, hey, look, here's a second space report. Hey, 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? And maybe there's going to be some pretty bad financial numbers in there because is 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 Lens 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 cash flow positive in five years. And it's just things have not gone right for that company since its history.

And so to 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 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... That was Chaleth. I don't know his name. I can't pronounce his name.

Palatatia. Palpatia. That was him. He was going around. He was bailed at this point. So... Oh, yeah. He and Brantz, is Branson completely out too?

No, 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 not there yet, but I'm working on it. But maybe by the end of the show will be ready for some really wild. I'm going to only drink beers that map to the percentage of Virgin Galactic that Branson owns. And it'll just like, I've slowly worked my way to Utah beers.

Okay. So he was, Palapagetia was making that prediction back in 2019 to kind of goose his thought. And I think that's that's, that's Eric Berger talking. But like, there's no way that they get from here to there with any of their technology. So it just seemed like that was sort of like, this is the grand vision, but there's no way to get. Oh, 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.

So, I mean, there's, like, 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 this is a, this is a, 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 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 moment. And especially when they talk about Virgin Galactic going to other places, flying a spaceship out of 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 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? Michael, do you know? I think for most part, it's coming from like a scaling down on the development costs. If you look back through their cap table in the previous years, it was more, you know, 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 know, you look at the pro forma cash, right? So cash and debt that they have on hand. They just had this debt raise 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 to a lot of other companies that are in the kind of scale up mode, but they're going 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 that it does,

it makes it just even in like you said, a rosy-eyed scenario makes it really, really tight. But I think at the end of the day, like we could easily see that development cost go back up in the next year or two. Yeah. I'm not. I'm not pumped on where Virgin's heading at the moment. I've never been big on their, 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. 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. 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, you know, $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 has 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. 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 going to 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 I think that Blue Origin, if they continue to really stake their claim and say, hey, we're doing this two-minute spaceflight 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 Virgin Galactic reservations fly on Blue Origin

before they fly with Galactic just based on how many people flew last year. The thing that would 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 Galacton. 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, 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, 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 Shepherd capsule for humans. And so, you know, let's say that comes online in year or two.

There's still, you know, let's say they do 20 flights a year. That's 120 people. Yeah. I mean, that's not putting a dent, I think, in 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, and, and, you know, it's, it's not, it's not, 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 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 if, if I don't think Blue Origin, it's, 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, to meet that demand. So it's like, I just think we're going to be able to have much more demand than than supply exists until least Starship gets flying. I mean, some more both plays. Did you guys watch this Dylan Taylor video, by the way? Yeah. The end-to-end video.

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 seed. and you know what it would really like for everybody for the whole flight and I mean yeah it's a it's a it's a cool video I'm glad Dylan posted it it is the greatest marketing material because 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, normy 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. And it's clear that the New Shepherd 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. So, yeah, I mean, 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. you know my problem is that you know it still costs seven figures to go and they're only going to probably fly you know maybe 10 times a shoot uh the only other spec related thing that i wanted to talk about is is what to do about launch companies that are public and attempting to launch a rocket because there's been some really haywire stuff uh astra in particular had their first launch out of cape and Averill and they, what was it, the last second abort, caused their stock to drop.

I'm pulling up your article to figure out how much it was. It was like 15% or something, just from having a T-0 abort. Right. What do you make 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 there? I thought this is going to be a simple question, but not you know, no, I'm layering it all in. public marketplace. I love it. No. So 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 IPO, or in this case, through the SPAC's

pipe and the shareholders, the SPAC already raised money from. But then secondarily, once you're in the marketplace, you can raise equity capital 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 know, the foundation of the company. Now, the reason I would definitively cite to a lot of the trading you see in these names around a, say, a launch abort, for example, is because it comes down to a speculative play. This is a company that, you know, the revenue is in the tens of millions, 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 the company, and therefore people trade pretty volatility off of that, speculating, as they say in the street,

to say, hey, I think it's going to 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 even on Wall Street, would look at a launchboard and say, yeah, we understand that this isn't the end of the company. It didn't blow up the rocket.

There's no, you know, huge infrastructure lost 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, you know, day trade and sort of on these momentum swings.

But I think a bigger issue is that, you know, generally people don't really understand the industry that they're investing in to some extent. I mean, because like 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 the fact that they were. were able to recycle pretty quickly, I think is, you know, tells them is a positive story. In 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 million dollars maybe in revenue for a launch? And they've launched once successfully. And they've spent probably, you know, $100 million or $200 million, who knows. Now, an unnamed acquaintance who we all know is telling me I should say bad things about Chris Kemp on air. I'm not going to do that. It's like a riddle. Now we're Michael and are like, huh. Who could that be? But, you know, the CEOs are out there sort of promising these big, these big returns and sort of to try to get, you know, 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 else? 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? No, no, I'm saying drop the small. Right.

As a launch company ever made money. I mean, yeah, it's a great point. I mean, unless you are backed by an institution, like Ariens Boss 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. 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, yeah. And Rock 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 Systems Division and the acquisitions that they've made as well. So 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, you know, 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 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 the stock in the, you know, day of or day following after a successful mission. And to me, 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 height before the launch and, you know, the stock runs up a bit. And then they sell it after it's successful. 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 versus buy 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, the 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 puts in a Falcon 1 to yeah to the National Mall National Mall yeah and that one was not a 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 Poliakov said that he was selling 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. So now A.E. Industrial Partners, who I think the last time they were in the headlines, we're putting like a billion dollars into Sierra space. Yeah, one point in to 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 Poliukov stake for. I heard a rumor. 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 stake or whether

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 Poliakov of it all. I've talked to Polyakov one time before, and it was an interesting interview. But, you know, Ashley Vance, who wrote the Elon Musk biography and I know fairly well

and respect, and we talk from time to time. He's got to know Polyacroft 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 on this whole process. But it's very opaque from the outside. 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'd always concern with 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 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 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's a resolution of this issue. And Firefly last week put out their video saying that they had acceptance tested their first and second stages for flight two. And so, you know, I think they still have a path forward. You know, 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 in their schedule on that. So I'd like to think that this company that's been through a lot, right? Marcusek came here with some baggage from Virgin Orbit and then the company went bankrupt and he found a backer of Polyakov and then Polyakov's 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. And it just seemed like that opportunity is still in front of the. them with this now being resolved polyacott stepping aside and some private money can be it. I think it's a fascinating story because Alpha got off the pad at Vandenberg. Yeah, they had

an issue with the engine. 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 it's one of the things that we come back to in the industry, which is that like renders and showing off bits of hardware and all sorts of different things are interesting. But showing a completed product is such a whole different ballgame. And the fact that they, even though they didn't make it to orbit, they did so much along that way. And I think it makes sense why someone like a industrial 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 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 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 that works or not there's 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, Anthony, I've heard good things about their technical people and their approach. I mean, I, you know, like I said, I think. is hopeful that they, as I say, they have a path forward. And now they 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. Like, I'm convinced of it.

And Eric, you had a great piece on their plans for Taryn 1. My thing with them is that always that 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, as my bet on them. So being able to drop in on Firefly, who's, like, gotten the most gnarly things out of the way of actually building a rocket, setting up a launch site, and they are in that, you know, we could probably use the software development idiom here that the first 90% takes 90% of the time, 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 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 sort of quasi-medium heavy lift. you know, with the Taron R. So you say running away from that section of 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 just 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 other things company. I think, I just, 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. 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 are people who are kind of, you know, the joke is out there that I've heard of Relativity X, 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 manufacturing company in many ways first. but with this very central driving principle 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 disruption 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 it's, it's, I agree. actually agree with Michael. I thought he said it very well. I think, you know, Tim Ellis is pretty

committed to 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 bambrusal that's happened before. So the slightly related Firefly topic would be if we want to 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. Yeah, I'd say that even with, you know, Dimitri tweeting the way he has, as today, the fact that NASA's boilerplate statement hasn't changed in the last 24 hours about, hey, continuing cooperation with all of 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, you know, 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, okay, how do we divest from this?

But, yeah, at the end of the day, the inner opera, 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 just a lot of support in Congress for continuing to fly station to 2030. They're going to have, 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 two shall pass. That things could still go wrong. I mean, I wrote the other day that Dmitri Rogerson is definitely a wildcard 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, in his speech. And this is really, counterproductive 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 Soyuz vehicle for really bad bad reasons when they knew he was 100% lying so and and calling you a war criminal and calling me a war criminal yeah don't let let's forget that launched a thousand spicy

memes which I love them all um but he you know he he's 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. I just think it's, it's in both countries' interest to keep it going for now, unless things get significantly worse. Yeah, there's two angles that is, one, it's not going to be NASA's decision either way.

Like, 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 rush of 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 Space Station.

This is the chance to try to get funding. If your 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, Ross Cosmo says, all right, we're not extending.

Even if it doesn't, you know, 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, contractors at Johnson Space Center. Yeah, there'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, you know, the back of mind, I would have said like, no, I don't, 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 it are on the Russian segment, which is the case, there's the same case to be made, same reasoning, 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. 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 cluge up a solution and launch it in the next two to three years. And you would have to leave that in two or 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 an unprecedented situation where the sand could change quickly. And, 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, how about 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 aspect, and by God, they call it a manifesto, which I love. 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 Ashbacher's the new director general of the Easton. 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. So I wrote a story about it. And then Dimitri, Rogerson, our friend tweets that story out like the next day and says, hey, we could do a Soyuz from French Guiana. And then I retweeted that. And he was in like his, the head of Glass Cosmos basically said I was a tank. terrible human being, a liar, and, you know, it just said all these nasty things about me, which I thought was hilarious. But Rogerson did tweet that, like, they should launch Soyuz from French Guiana, 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, it was 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, it's just sort of, it's just, it's just, it's, it's, Rogazen is such a clown in so many ways. Like, I mean, I clearly was just screwing around saying, hey, you guys should buy Soyuz when he knew like, you know, there's no way that was going to happen. It's just, it's the Russian sense of humor or like, I don't, I don't, I don't quite understand. the psychology of it. 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 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 like, they all put money into ESA. And basically, however much money you put to ESA, you expect that proportion of money to come back to the industry in your nation. And so, like, there'd be a huge food fight over who built the Eklis system for the spacecraft, and who built the propulsion module. 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 Rigo isn't just, like, trolling you in particular. Yes, he does. Yeah. I think your favorite character on Twitter. I wouldn't use the word favorite Well it's my favorite It's my favorite Twitter drama

So You know he's 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 Yeah that was probably it Yeah I would recommend that

Well but I'll see working on these days Eric You got anything else cooking Uh I mean, it's just trying to keep up with 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 Artemis program.

You've got the 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 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 and 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, great respect for people who can, you know, really turn around stories at an incredible clip. But yeah, 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 risk 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, class action lawsuit against us. Here's a 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, okay, yes, like, I do want to invest in. 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 would not be surprised if there are some losers here in the next year or two, companies that delisted. We saw one web already go bankrupt. But there are gonna be winners and there is gonna be this kind of momentum and I think in a lot of ways that momentum is at a point where it's not gonna be stopped

by anything short of like a serious economic crash in the United States. Like, there is so much going now that's become a robust industry that all of this in the long term, I think, is going pretty nicely in trending upwards. Yeah. Good spot to end it. Michael, Sheets, CNBC, is where you can find you. The Sheets tweets with all Z's. All these, man.

I feel like I always type something wrong in there. The first one is, is an S. And Eric Berger, what do you want to plug? Rocket Report. I want to say a couple things. First of all, I would just say Michael has brought a tremendous amount of energy and 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 VIA space, V-A-A-A-Space.com website because they've, for some reason, waited three weeks to put out a news release saying that they had created a suborbital launch of their rocket in advance of no no you got to do the launch go find the video go is this what i'm looking at the news launch yeah that's the correct website but go oh no i don't know i don't know if i caught this one find the news twitter we going on twitter i don't know if they tweeted but there's a video you got to find the video yeah we really owe it to your your viewers to yes go down is it on this one oh

Nice. Okay, I'm going to go full screen on this sucker. Oh, I'm glad. I'm going to hear it. 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 day.

Gone. So, 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 29 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, 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. But in the news release, they talked about how this was a successful. will suborbital tests and it clearly sets them on this path to be forced to reckon with, go read it. And it's an actual quote. And then, and then that they're going to do an orbital

launch in 2023. So, I mean, caveat mTOR. A thing to watch. If they 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. Anyway, people enjoy that video, I think. Yeah, that's great. And you can get content like that on the Rocket Report, which is what I would recommend. Absolutely. Next week, I've got a good one next week.

Jake's going to 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 and lunar orbit. preempting Artemis 1. So that's going to be a fun one next week.

So I'm looking forward to that. But thank you both for being here. This is awesome to hang out. And I feel much better about today after talking to you too. Thanks for being here. Thanks for watching, everybody. We'll see you later.

Thanks. Talk you guys. 1, 2, 3, 4, 3, 2, 1,000, 2, 1,000, end of death.