Shares of satellite manufacturer Terran Orbital (LLAP -3.67%), one of the more recent "space SPACs" (special purpose acquistion companies) to have come public in a SPAC-sponsored IPO only in March 2022, are getting a big boost on Monday after announcing that defense giant Lockheed Martin (LMT 0.52%) has invested $100 million in the company in exchange for convertible notes and warrants to buy stock in Terran.
As of 11 a.m. ET, shares of Terran are up 14%.
This is a pretty heavy bet Lockheed is placing on Terran, whose entire market capitalization was just over $300 million as recently as Friday. Just as significant, Lockheed Martin has tied up with Terran in what the companies are calling a "Strategic Cooperation Agreement" (SCA) that Terran says will allow it to pursue a wider variety of opportunities with Lockheed Martin for the duration of the SCA, i.e., through at least 2035.
But the cash is nice, too. Terran says it will deploy Lockheed Martin's funds to acquire new satellite-manufacturing space in California and to increase satellite production. Additionally, $100 million in new cash, added to Terran's existing cash reserves, will be enough to put the company in a net-cash position on its balance sheet, offsetting all existing debt.
Now about those opportunities with Lockheed Martin.
According to Terran, its new relationship with the defense giant appears to be taking the form of a sort of preferred provider of satellite parts and entire satellites as well. Going forward, Terran intends to emphasize production of what one might characterize as spy-satellite payloads, including Synthetic Aperture Radar (SAR), electro-optical, hyperspectral, and infrared cameras. Also being produced at Terran's new factory will be satellite parts such as star trackers and reaction wheels, flight computers, navigation and control systems, batteries, and also secure communication payloads.
At the whole-satellite level, Terran will emphasize production of its PredaSAR Earth-observation satellites. In contrast, Terran will be abandoning its plan to build its own Earth-observation satellite constellation, instead specializing in building parts and satellites for other constellation operators.
Long story short, after today's announcement, it appears Terran has hitched its future firmly to Lockheed Martin and received a financial lifeline in return. Seeing as the company was burning through cash at the rate of $76 million a year before the announcement and would have run out of cash otherwise within a year, that seems like a good decision to make.