Shares of small rocket builder Astra Space (ASTR 3.35%) crashed to earth on Wednesday, down 10% as of 12:15 p.m. ET.
In a short-selling announcement this morning, Kerrisdale Capital Management warned of what it termed an impending "dis-Astra" and urged investors to sell the stock.
Astra went public recently through a special-purpose acquisition company (SPAC). This is a company "with no revenue, no track record of reliability, and no established market for its undersized vehicle," Kerrisdale said. Management added that it's "yet another example of the questionable businesses going public via SPACs."
Astra successfully launched its first rocket into orbit last month, but Kerrisdale is supremely unimpressed with the company's technology, scorning its decision to buy "cheap, off-the-shelf ... non-aerospace grade parts" that are incapable of making its rockets reusable, and alleging that it signed a secret deal with a competitor to get access to the latter's more powerful engine.
The analyst is also unimpressed with Astra's promise of conducting 300 launches per year by 2025, a number that Kerrisdale says would be 10 times more than Elon Musk's SpaceX achieved in 2021 -- and probably "pure fantasy."
As competition in the rockets sector increases, Kerrisdale believes that innovators will outperform imitators like Astra, with builders of reusable rockets having the greatest cost advantages. Over time, the analyst warns, "the relentless price deflation that characterizes today's launch market" will prevent Astra from ever earning a profit and ultimately end in disaster for the space stock.
But even that's not the worst news, according to Kerrisdale: As early as tomorrow, the end of the lock-up period for 91 million shares of Astra stock could send the stock "to the ground."
Kerrisdale suggests that it's a good idea to bail out now before that happens.