One Guy's Investments

The story of Travis Johnson's investment portfolio, with analysis and thoughts on the stocks and funds I've considered, bought and sold. I don't claim to have brilliant picks that will make you money, and I'm not an investment advisor, registered or otherwise, so don't follow my moves unless you're happy to lose money without suing someone. I'm just one guy. My articles get republished in several places, but always appear here first -- subscribe now(totally free via RSS) to see them before they're on Yahoo Finance.

Monday, August 21, 2006 -- Subscribe free

Sad news for SpaceDev (SPDV)

Well, the news came out after the market closed last week that SpaceDev (SPDV) is not going to be one of the winners of the COTS contract for NASA.

The COTS contract is a huge one for the small companies that were involved, and it would have brought tremendous upside to SpaceDev -- but SPDV was not built to win this one contract, and the company is set up to be sustainable without any one contract.

Still, it's disappointing news. The news was much better for Rocketplane Kistler and SpaceX -- both of which, coincidence or no, are private companies -- one is the result of a merger this Spring between Rocketplane ltd. and Kistler Aerospace, and SpaceX is the pit into which Paypal founder Elon Musk throws his money. SpaceX, actually, is key to the potential of SpaceDev's private microsatellite program, as they have already contracted for a launch of the (still not operational) SpaceX Falcon launch vehicle to bring a payload of SpaceDev microsatellites into orbit.

Rocketplane Kistler arguably has the design that's most like SpaceDev's DreamChaser, in that it's based on a spaceplane design somewhat like a smaller version of the current shuttle, so if there was a spot for SpaceDev on this contract I expect we have Rocketplane to blame for them not getting it. SpaceX's Dragon spacecraft is essentially a capsule that rides on the Falcon launch vehicle.

It's hard to argue with NASA's decision -- they're hedging their bets with two designs, and while I wish they would have selected SpaceDev's design I don't know of any technical reasons why it would have been a better choice -- and SpaceDev is one of the smaller and less experienced companies in the mix, so a win was always a long shot (even if I was a bit more optimistic earlier).

But while this contract would have been a huge positive for SpaceDev, the loss of it does not mean the company is in particular trouble -- as you can see by the fairly benign 5% drop in SPDV shares today, compared to the 23%+ drop of the shakier SpaceHab (SPAB) even though they're also involved in the SpaceX contract team. T/Space and Andrews, the other two finalists, are also privately owned (and significantly younger than SpaceDev).

So it's unfortunate, but it's not a deal breaker. It's encouraging that there clearly wasn't much hype over COTS built into the SPDV price, which is how I read today's tepid decline, but I will be watching SpaceDev closely over the next quarter or two as they continue integrating Starsys and winning contracts and subcontracts for their satellite, propulsion, robotics and mechanical space work. I continue to believe that the company is stable and has a bright future, and is reasonably priced given their current sales and technological capability, but if they fail to continue growing their contract pipeline significantly that future will dim considerably.

Labels: SPDV

This article posted by One Guy @ 8/21/2006 03:59:00 PM 2 comments

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Comments:

Your basic comment - that COTS doesn't directly negatively impact SPDV.OB, per se - is correct. Basically, SPDV.OB's business plan they are on is still valid - and COTS came, and went, in the course of a year. Except for trying for COTS, in essence, nothing has changed for SPDV.OB.

Of course, the existence of COTS DOES change things; particularly since NASA has - finally- taken one real step forward in an effort to create a LEO space services industry, and everyone knows it now.

A couple of things to point out:
1. NASA defined four COTS missions -but picked only two winners. That, in part, defines why SPDV.OB didn't get it...since they were primarily oriented towards the hardest, most advanced part only - human taxi service. The two bids selected have a laid out plan that says they'll each tackle all the missions - but the unmanned ones (the ones needed most and earliest) first. If a single crewed option contract would have been awareded, I personally think SPDV.OB would have gotten it.

2. Interesting that SPDV.OB had exactly the same team members as another one of the 'failing' bids. Was there a 'fatal flaw' (from a NASA viewpoint) among one of them?

On the other hand: that two competing companies found value in assembling the exact team players (e.g., Aerospace, Adams Aircraft, etc.) itself might lead one to believe that such a team has real potential value for future projects.

3. SPDV.OB, like a couple of the others, is far from dead; they already have others paying for some of their product developments, combinations of AFRL and DARPA monies. In short; other parts of the government are ensuring that two years from now they will have accomplished related development activity that could conceivably beef up the 'real' NASA COTS awards: the Phase II ones. (e.g.: SPDV.OB has a contract to upgrade the size and power of its hybrid rocket motors; and, Andrews Space has AFRL money to continue work on a similar project, the hybrid launch vehicle project. That is one where the intent is a reusable first stage, expendable second stage - and growth capability beyond to include military crew
transport).

4. As you implied, the one really hurting here is the most expierienced company: SPAB. Their approach was the least risky and had the highest probability of success, IMHO. But.....it also got that lower risk, in part, by using current EELV launch vehicles; something that, I think, appears to be against the religion of both Mike Griffin and Scott Horowitz, for some reason.

The good news -- IF this works - is that we'll have two brand new launch providers to bring real innovation and competition to an industry that desperately needs it.

Dave Huntsman

Permanent Link posted by

Dave : 2:12 AM

Thanks for the comments, Dave -- I think you make some good points. Investing in any of the small space companies is certainly very speculative, but I agree that SPDV has the funding and the contract stream ... so far ... to keep building its product line. I hope that the super wealthy who are pouring money into this area (Musk, Richard Branson, Paul Allen) will help raise the industry to the next level, but in the meantime SpaceDev can keep chugging along with its slowly growing and profitable business.

Permanent Link posted by

One Guy : 10:40 AM