SpaceDev Cadet
OK, now to one of my favorite stocks that is lightly traded, tiny tiny tiny, in a sector built more on dreams and government whim than on earnings, and almost impossible to fairly value.
But it's awfully fun.
Bought SpaceDev (SPDV) on February 18, 2005 at $1.80.
SpaceDev (SPDV.OB) is one of the few stocks that I've ever considered, let along bought, that wasn't traded on a major exchange -- they're traded over the counter, but shares are fairly liquid considering their small size. At $33 million market cap they are certainly very very small, but they're far from the smallest fry on the OTC plate.
And you can certainly tell that I didn't pick the perfect time to buy -- my position is down about 20% at this point, and every now and again I think about buying a little more. I think the company may be nearing an inflection point where their earnings should increase substantially over time and they may soon approach listing on the Nasdaq or ASE, which is one of their goals as a company.
SpaceDev is small and flies under the radar (or over it, more accurately), but it's not brand new. Founded by Jim Benson in 1997, SpaceDev's basic business premise is to bring the microcomputer and microelectronics revolution to space. That means, for the most part, making space exploitation and travel easier and more affordable and thus commercially viable for more users.
They have a pretty good strategy, I think, and one that has started to bear some really tasty looking fruit of late. Their basic strategy is to use government and academic research contracts to build their own products and knowledge base, and use subsequent contracts to continue building on their technologies and capabilities. The end result, if they are successful, will be a very accomplished space services company with the ability to build, sell and service manned and unmanned space flight, satellite launching and management, etc. The products they build use off-the-shelf parts, are modular and where possible miniaturized, and are all designed with an eye to making it cheaper to take advantage of space, whether it's for tourism, missile defense, more efficient satellite communications, or something else.
SpacDev is no rookie in this game -- they actually have products in space right now, and in their biggest news breakthrough of late they supplied the safe and effective fuel that powered Space Ship One in it's successful effort to win the Ansari X Prize. That's an example of what SpaceDev's innovation can do -- they used this particular project to create and perfect a safer rocket fuel, one that they can then use in the vehicles they're developing.
But their biggest moneymaker right now -- and they have recently started posting positive earnings -- is still government contracts, specifically Defense and NASA contracts. Their biggest contract, which is still ramping up to it's big-cash stages, is a microsatellite array that could be part of a possible missile defense system. Again, this is development of a set of satellites that are small and work in a network for maximum efficiency and capability, and that technology can be used for more than just this one (huge though it is for SpaceDev) government contract.
The strategy means that SpaceDev has a lot of very small irons in the fire at any one time -- they work on sometimes very small contracts of sometimes just a hundred thousand dollars, but each of those contracts is a building block either toward a bigger project that SpaceDev can be heavily involved in, or toward developing their own technology further and using the contract to basically subsidize their R&D on that particular widget. The plans, contracts and accomplishments sound so cool it's hard not to get excited about them -- servicing the interplanetary lunar base, sending satellites or probes on a "Interplanetary superhighway" to the moon to validate a lower cost route, running an array of microsatellites from the internet and creating a space-based internet node, and building reusable passenger vehicles for low earth orbit, then outer orbit, then deep space, that make the space shuttle look huge, clunky and decades out of date -- which of course, it is.
These guys are tiny, and they're not spending a lot of money marketing themselves -- even their annual report with it's pixelated logo on the cover looks like a high school kid put it together in 1980. That's a sign of smart management, in my opinion, and the fact that the Bensons control so much of the stock and they and the board have in the past provided cash infusions when SpaceDev had some lean times also means we have a core group of very motivated and committed insiders running the show with an eye to the success of a long term business in the sky.
Oh, and they've posted ten consecutive quarters of revenue growth (not to mention six quarters of operating profit, and two quarters of actual net income) -- that brings us closer to the inflection point I mentioned earlier. If you read the 10-K (actually a 10-KSB in this case) for SpaceDev, look down through the history of the company that they provide in the first pages. It covers lots of what I've mentioned above -- lots of small contracts used to develop exertise, some notable achievements including the fuel for Space Ship One, and the last contract mentioned blows all the others away -- up to $40+ million for the missile defense microsatellites. They finished phase one which brought in about a million dollars, and the phases coming up -- phase two ends in January according to the initial plan, with total allotment of up to eight million dollars -- continue to grow significantly as the project gets closer to actual construction, launch and testing.
That, by my reading, puts SpaceDev in a whole new league. It's a cost-plus contract, so obviously not all of that cash will trickle down to earnings, but beyond increasing SpaceDev's capability in satellite work, this contract, if effectively executed, gives SpaceDev a much higher profile in the business and perhaps could open the doors to a lot more work ... if their part of this works.
But it's also a lot bigger than the other irons SpaceDev has in the fire right now, so if they prove unable to build on it with more work, their revenue could drop off precipitously. I'm not worried at this point, but it looks like a significant risk. And while their plan of attack gives them a very different approach than Boeing, Lockheed or the other titans of aerospace, to some extent they may have to compete with those big guys on contracts -- and there are some other small players, too, including the several companies that have popped up with plans for commercializing space flight and that got a lot of attention after Space Ship One. I like the fact that SpaceDev has a diversified approach and has built up a business over the years with incremental successes -- while commercializing space flight will be great for SpaceDev, they aren't just relying on a pie-in-the-sky plan to fly buses into space for millionaires as some companies seem to be (or hoping for a huge windfall from Richard Branson to put Virgin Galactic into operation).
Of course, SPDV is a highly volatile little stock. It might never make it to the big boards. They have had lots of dilution to pay the bills over the years. And they are highly dependent on the personal involvement of their board and leadership, so there's certainly some risk if any of them leave the company.
But it's a nice dream -- a successful little space company just coming into it's own, and may be worth a twirl for those with fond memories of The Right Stuff. But be careful. I bought this for fun and a chance of great success, but with full expectations that it might not work. I'll keep it most likely until SpaceDev is either a big success on the Nasdaq, or bankrupt.
But it's awfully fun.
Bought SpaceDev (SPDV) on February 18, 2005 at $1.80.
SpaceDev (SPDV.OB) is one of the few stocks that I've ever considered, let along bought, that wasn't traded on a major exchange -- they're traded over the counter, but shares are fairly liquid considering their small size. At $33 million market cap they are certainly very very small, but they're far from the smallest fry on the OTC plate.
And you can certainly tell that I didn't pick the perfect time to buy -- my position is down about 20% at this point, and every now and again I think about buying a little more. I think the company may be nearing an inflection point where their earnings should increase substantially over time and they may soon approach listing on the Nasdaq or ASE, which is one of their goals as a company.
SpaceDev is small and flies under the radar (or over it, more accurately), but it's not brand new. Founded by Jim Benson in 1997, SpaceDev's basic business premise is to bring the microcomputer and microelectronics revolution to space. That means, for the most part, making space exploitation and travel easier and more affordable and thus commercially viable for more users.
They have a pretty good strategy, I think, and one that has started to bear some really tasty looking fruit of late. Their basic strategy is to use government and academic research contracts to build their own products and knowledge base, and use subsequent contracts to continue building on their technologies and capabilities. The end result, if they are successful, will be a very accomplished space services company with the ability to build, sell and service manned and unmanned space flight, satellite launching and management, etc. The products they build use off-the-shelf parts, are modular and where possible miniaturized, and are all designed with an eye to making it cheaper to take advantage of space, whether it's for tourism, missile defense, more efficient satellite communications, or something else.
SpacDev is no rookie in this game -- they actually have products in space right now, and in their biggest news breakthrough of late they supplied the safe and effective fuel that powered Space Ship One in it's successful effort to win the Ansari X Prize. That's an example of what SpaceDev's innovation can do -- they used this particular project to create and perfect a safer rocket fuel, one that they can then use in the vehicles they're developing.
But their biggest moneymaker right now -- and they have recently started posting positive earnings -- is still government contracts, specifically Defense and NASA contracts. Their biggest contract, which is still ramping up to it's big-cash stages, is a microsatellite array that could be part of a possible missile defense system. Again, this is development of a set of satellites that are small and work in a network for maximum efficiency and capability, and that technology can be used for more than just this one (huge though it is for SpaceDev) government contract.
The strategy means that SpaceDev has a lot of very small irons in the fire at any one time -- they work on sometimes very small contracts of sometimes just a hundred thousand dollars, but each of those contracts is a building block either toward a bigger project that SpaceDev can be heavily involved in, or toward developing their own technology further and using the contract to basically subsidize their R&D on that particular widget. The plans, contracts and accomplishments sound so cool it's hard not to get excited about them -- servicing the interplanetary lunar base, sending satellites or probes on a "Interplanetary superhighway" to the moon to validate a lower cost route, running an array of microsatellites from the internet and creating a space-based internet node, and building reusable passenger vehicles for low earth orbit, then outer orbit, then deep space, that make the space shuttle look huge, clunky and decades out of date -- which of course, it is.
These guys are tiny, and they're not spending a lot of money marketing themselves -- even their annual report with it's pixelated logo on the cover looks like a high school kid put it together in 1980. That's a sign of smart management, in my opinion, and the fact that the Bensons control so much of the stock and they and the board have in the past provided cash infusions when SpaceDev had some lean times also means we have a core group of very motivated and committed insiders running the show with an eye to the success of a long term business in the sky.
Oh, and they've posted ten consecutive quarters of revenue growth (not to mention six quarters of operating profit, and two quarters of actual net income) -- that brings us closer to the inflection point I mentioned earlier. If you read the 10-K (actually a 10-KSB in this case) for SpaceDev, look down through the history of the company that they provide in the first pages. It covers lots of what I've mentioned above -- lots of small contracts used to develop exertise, some notable achievements including the fuel for Space Ship One, and the last contract mentioned blows all the others away -- up to $40+ million for the missile defense microsatellites. They finished phase one which brought in about a million dollars, and the phases coming up -- phase two ends in January according to the initial plan, with total allotment of up to eight million dollars -- continue to grow significantly as the project gets closer to actual construction, launch and testing.
That, by my reading, puts SpaceDev in a whole new league. It's a cost-plus contract, so obviously not all of that cash will trickle down to earnings, but beyond increasing SpaceDev's capability in satellite work, this contract, if effectively executed, gives SpaceDev a much higher profile in the business and perhaps could open the doors to a lot more work ... if their part of this works.
But it's also a lot bigger than the other irons SpaceDev has in the fire right now, so if they prove unable to build on it with more work, their revenue could drop off precipitously. I'm not worried at this point, but it looks like a significant risk. And while their plan of attack gives them a very different approach than Boeing, Lockheed or the other titans of aerospace, to some extent they may have to compete with those big guys on contracts -- and there are some other small players, too, including the several companies that have popped up with plans for commercializing space flight and that got a lot of attention after Space Ship One. I like the fact that SpaceDev has a diversified approach and has built up a business over the years with incremental successes -- while commercializing space flight will be great for SpaceDev, they aren't just relying on a pie-in-the-sky plan to fly buses into space for millionaires as some companies seem to be (or hoping for a huge windfall from Richard Branson to put Virgin Galactic into operation).
Of course, SPDV is a highly volatile little stock. It might never make it to the big boards. They have had lots of dilution to pay the bills over the years. And they are highly dependent on the personal involvement of their board and leadership, so there's certainly some risk if any of them leave the company.
But it's a nice dream -- a successful little space company just coming into it's own, and may be worth a twirl for those with fond memories of The Right Stuff. But be careful. I bought this for fun and a chance of great success, but with full expectations that it might not work. I'll keep it most likely until SpaceDev is either a big success on the Nasdaq, or bankrupt.
This article posted by One Guy @ 9/08/2005 10:52:00 PM 1 comments
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