The amount of short interest in Rocket Lab’s stock is rising but its founder and chief executive Sir Peter Beck is not fazed by a growing number of investors betting against his company.
“It’s not surprising at all, in fact it’s probably surprising it’s that lowgiven the amount of failure in the space industry,” Beck told Markets with Madison.
“You don’t need to look far to see a large number of space companies, especially launch companies, that really had no chance, promised the earth and then just absolutely ran into a wall.
“So, I think there’s a lot of suspicion within our industry.
“My CFO [chief financial officer] always reminds me that we have the best house on the worst street and along with that comes these types of things.”
About 20% of the Nasdaq-listed space company’s share float was sold short, representing 62 million shares, an increase of 1.4% on the previous month, according to MarketBeat.
“I don’t wake up every morning and look at the short interest and think ‘Oh my goodness,’ I wake up every morning and think ‘Right, we’ve got milestones to hit, how do we get here?’”
Beck said the increase in short selling was partially a result of its upsized US$355 million (NZ$593m) convertible note offering to institutional investors earlier this year, to help fund potential acquisitions and pay down debt and associated interest costs.
“There’s always more shorts that come along with a convert.”
He said his company had no plans to raise more capital as it continued building its new rocket Neutron and all its associated launch infrastructure – a move that he believed opened up a US$320 billion (NZ$535b) opportunity for the end-to-end space company.
It had budgeted between US$250m and US$300m to make and launch Neutron by 2024. That schedule has slipped to a mid-2025 launch, but its finances have not.
“We’re on target for that [cost]. As far as holding to budget, it’s pretty impressive,” Beck said.
“Once again, you always have to put this into context. The Vulcan launch vehicle from ULA [United Launch Alliance], I think Tory [Bruno, the CEO] recently publicised it was something between seven and nine billion dollars to put that vehicle on the pad.
“So, a few hundred million dollars is crazy small to do what we’re going to do.”
Neutron-omics
The cost to fly the 43-metre-high, reusable, carbon composite Neutron rocket was set to be US$55m, meaning it would break even on its development cost within six launches.
“The return on investment for Neutron is very fast,” Beck said.
“That’s all good business ... But don’t forget there’s a US$320b opportunity sitting over here that’s enabled by Neutron.”
He pointed to SpaceX’s Starlink satellite internet service as an example – although that was not a hint at his grander plans.
“We don’t talk about what application we’re going after because it’s just too early.”
Once Neutron was flying, Beck said, it would shift the balance of its books, where only one-third of its revenue was earned from launch and the majority was made from its space systems division.
“We hope to have a pretty decent clip on these vehicles so you need to continue to invest in the programme.”
He explained that Neutron’s expenditure would exceed the initial development cost once the first was built and launched, as production scale was required to make more.
Following the production playbook from its smaller Electron rocket, Rocket Lab planned to produce Neutron consistently once it launched for the first time.
The company was gearing up its team and facilities to do so. For example, it bought the failed Virgin Orbit factory in Long Beach and converted it into a production facility for Archimedes, the engine designed and built specifically for Neutron.
“Now we’re banging engines out of a production line,” Beck said.
It successfully tested the full-flight engine in August, in a “hot fire” moment that was deemed one of the most critical development milestones.
“Archimedes performed well and ticked off several key test objectives, including reaching 102% power, anchoring the engine’s design ahead of Neutron’s first flight scheduled for mid-2025,” the company wrote in a statement at the time.
“A schedule that would make Neutron the fastest commercially developed medium-class launch vehicle [that] has been brought to market.”
The plans for Neutron were announced in March 2021. It will be able to carry 43 times more mass to low-earth orbit than Rocket Lab’s existing small-lift Electron rocket and, if successful, could compete directly with SpaceX’s launch business – “breaking apart that monopoly” held by Elon Musk, as Beck put it.
All the infrastructure
“A lot of people think of a rocket programme as just a rocket, but the rocket is actually a relatively small element,” he said.
“The pad infrastructure – we take all the concrete in the larger region, for days on end, just to do one thing. So, these infrastructure projects are just massive.”
To see the scale of the project surrounding the new launch vehicle, and check on its progress, Markets with Madison visited Rocket Lab’s launch site in Wallops Island, Virginia.
It was the first time anyone outside the company was allowed to see and film the site.
The new launch pad, named Launch Complex-3, next door to its existing Launch Complex-2, is on a coastal site owned by the Virginia Space Authority within Nasa’s Wallops Flight Facility.
The concrete base of the three-storey launch pad had been poured and four piles on each corner erected to hold the base of the 7-metre-wide rocket.
Two liquid oxygen tanks had been cemented into the ground, each able to hold 90,000 gallons of liquid oxygen (LoX) – significantly larger than the 3000-gallon tanks on LC-2 – and a further two tanks were still to come.
An 86m-high water tower, large enough to flow 200,000 gallons of water into the base of the rocket as it fired, was standing tall, painted black to match Rocket Lab’s branding.
Beck said water was required to suppress the sound created by launching the rocket, otherwise the vibrations could shatter the rocket and the pad.
Evidence of Neutron’s scale included Nasa widening the gate at the entrance to the launch pad so a trailer could take the rocket to the site.
Next to the gate, Rocket Lab had built a new rocket assembly and integration centre, where its team of 10 engineers was based, focused on meeting the mid-2025 launch date.
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Madison Reidy is the host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.