Hurray! This is surely just what we needed: Another space industry SPAC!
If you've been following the industry over the past couple of years, you've probably noticed that space stocks have not performed particularly well of late, with many suffering declines of as much as 80% and 90% from their pre-IPO prices. Would-be lunar lander maker Intuitive Machines, however, does not appear to be disheartened by its peers' troubles. It announced on Jan. 25 that it, too, would be going public via a reverse merger with a special purpose acquisition company.
Image source: Getty Images.
Get to know Intuitive Machines
What is Intuitive Machines, you ask? Well, according to the company itself, it is "the most NASA-awarded commercial lunar program". Although Intuitive Machines hasn't quite reached the moon just yet, it has won at least three separate NASA contracts to deliver payloads to the moon. At just over $77 million per mission, that works out to $233 million in NASA contracts -- plus additional revenue from commercial payloads that will piggyback on those NASA missions.
The company has at least two key products: a Nova-C lander that can ride a SpaceX Falcon 9 rocket to the moon, then land on it; and the Micro Nova Hopper, a small drone that piggybacks on the Nova-C, then "hops across the lunar surface" upon its arrival on the moon.
And Intuitive Machines has hopes of building even more products, and winning even more contracts, to further humankind's exploration of the moon.
Intuitive Machines by the numbers
According to an analyst day presentation on its website, Intuitive Machines expects to report total sales of $88 million for fiscal 2022. (That event was held in December, so the presentation's data may already be out of date.) That's only 20% more than the company collected in 2021, but Intuitive Machines says its revenue in 2023 will more than triple to $300 million, then more than double again to $759 million in 2024.
Admittedly, a one-year jump from 20% to 200% growth sounds a bit ... ambitious. But according to Intuitive Machines, the company has averaged a growth rate in excess of 100% per year since 2020. Intuitive Machines also says it has signed contracts worth $369 million for future performance, of which $188 million will be performed within the next year (i.e. "backlog"). Intuitive Machines is scheduled to launch its first NASA mission (IM-1) in the first quarter, to launch its second (IM-2) in Q4, and then to launch two more times (IM-3 and IM-4) in 2024 and 2025.
Longer term, Intuitive Machines sees as much as $120 billion worth of contracts it might conceivably win through 2030.
No word on profits on that revenue yet, of course, but management says it has a long-term goal of generating up to 52% gross profit margins on its revenues by 2024.
The reverse merger
How can one invest in all of the above? Well, Intuitive Machines just completed its reverse merger with the special purpose acquisition company Inflection Point Acquisition (NASDAQ: IPAX) this week, and now trades as Intuitive Machines (LUNR -3.30%).
But here's the thing: Management had forecast that once its SPAC merger happened, Intuitive Machines would have approximately 115.5 million shares outstanding and, at a valuation of $10 per share, a market capitalization of about $1.2 billion. Anticipating further that the company will raise $338 million in cash from the SPAC IPO, Intuitive Machines estimated it would have an enterprise value of $817 million, which -- assuming the company hits its revenue target -- would make for a svelte valuation of 2.7 times expected 2023 revenues (or a rather plumper 9.3 times estimated 2022 revenues).
Should you buy it?
Which brings us to the question of the hour: Should you buy the Intuitive Machines SPAC IPO? And I'm going to give you a straight answer here.
No. You absolutely should not buy into this newly public company -- and you probably shouldn't for a couple of quarters. You definitely should not touch this stock until the data has settled down a bit so that investors can digest it.
The numbers describing this company appear to be in flux, you see. Financial data providers seem incredibly confused by its IPO, and can't agree on quite how big it was, and Intuitive Machines may be partly to blame for this. Instead of the 115.5 million shares outstanding post-merger that were described in the company's December analyst day presentation, Intuitive Machines' January prospectus described at least 122.5 million -- and potentially more than 150 million -- shares being issued, which would raise the valuation on this stock considerably.
Other data points are also unclear. For example, instead of the $88 million in 2022 revenue described in the presentation, the prospectus notes that actual revenues through the first nine months of the year got it barely halfway to that goal -- $48 million. Meanwhile, Intuitive Machines lost upwards of $18.8 million on those revenues.
To top it all off, Intuitive Machines' prospectus for this IPO is quite simply one of the longest, most convoluted documents ever to appear on the SEC's website. It stretches 910 pages in length -- which is too long even for a space novel, and way too long for a space company's prospectus. It also contains 450 pages of annexes describing the relationship between Intuitive Machines and the SPAC that brought it public. I shudder to think what unpleasant surprises for the unwary investor might lie hidden within such a pile of paperwork -- and I don't relish the prospect of finding out the hard way.
Take my advice and pass on this SPAC IPO. Worst case, there will be plenty of time to invest in Intuitive Machines later on, after data providers get a better handle on how things are playing out. Best case, you'll avoid some unpleasant surprises.
