Thought Experiment: Five Possible Futures for Rocket Lab?

This thought experiment is based upon, and is a follow-up to, the article That dog won’t hunt… Rocket Lab’s Neutron Space Launch Vehicle.

Introduction

A thought experiment is a hypothetical scenario which is laid out for the purposes of thinking through its consequences.

This thought experiment starts with three assumptions related to: small launch market size, Neutron development risk, and competitive environment. Based on those assumptions, what are the possible future outcomes for Rocket Lab?

Scenario

Small Launch Market is Small

The small launch market is a niche (small) market. Small satellite launches will be dominated by medium and heavy launch rideshare services combined with orbital transfer vehicles.

Neutron Development Risks Underestimated

Neutron development will suffer from testing failures and production delays; pushing out revenue and consuming cash. This will negatively impact company valuation, investor interest and company reputation/customer confidence.

Competitive Situation Misjudged

Neutron will struggle to generate revenue. There is nothing that differentiates, or gives competitive advantage to, Neutron relative to SpaceX or any of the many other competitors that will be launching new vehicles this year and next.

Possible Futures

#1 – Taken Private

The company continues for several years working to complete Neutron. This effort requires ongoing fundraising, including taking on debt and stock dilution; the company’s ability to raise funds becomes increasingly limited.

Rocket Lab is sold to a private equity organization for Rocket Lab’s Space Systems and Space Applications business. The acquirer cancels Neutron and divests, or winds down, the Electron launch services offering. The acquirer will also attempt to monetize any intellectual property associated with the un-needed technology.

#2 – Pivot and Divest

The company’s Board of Directors acknowledges Electron’s total addressable market is niche (small), and that Neutron is not competitive. They decide to change the company’s business model and exit the launch services business in 2023.

Rocket Lab pivots to focus its energy and financial resources on accelerating growth of the Space Systems and Space Applications business; increasing vertical integration and market growth through acquisition of other related businesses.

The company cancels Neutron development, and divests or winds down Electron launch services. One of the large defense contractors might want to acquire Rocket Lab’s small launch service offering to be able to have a responsive launch capability in their portfolio.

#3 – Merger

The company’s Board of Directors decides to merge with a company that fills Rocket Lab’s near-term and strategic need for a medium lift launch vehicle.

The company cancels Neutron development and divests, or winds down, Electron launch services as described in #2.

#4 – Status Quo and Success

The company continues to execute its business strategy and manages to navigate a path to profitability without having to cancel Neutron, divest launch services, merge, or go private.