Earlier this year, privately owned rocket company Relativity Space made a curious decision. The maker of 3D-printed rockets -- which is something that sounds like a science project, but actually involves rockets big enough to put 1.5-ton payloads in orbit -- had just launched its first "Terran 1" rocket to space. The rocket didn't go fast enough, however, missed its intended orbit, and fell back to Earth.
Instead of figuring out what went wrong and trying again, however, Relativity decided to declare victory, junk its Terran 1 design, and proceed directly to building an even bigger reusable rocket, the "Terran R."
Image source: Getty Images.
Taking aim at SpaceX
Boasting a payload to orbit of 23.5 metric tons, the reusable Terran R rocket promises to be even more powerful than SpaceX's Falcon 9, which launches 22.8 tons to Low Earth Orbit. And with a stated goal of flying 20 times per airframe, Terran R might also be more durable than Falcon 9, the most robust model of which has now flown 15 times.
Numbers like these have attracted serious interest from space companies looking to hitch a ride to orbit. Even with Terran R not expected to fly before 2026, Relativity had already attracted $1.65 billion worth of rocket launches under contract as recently as six months ago. And this was after the company lost five contracts, to launch satellites for Iridium, to SpaceX -- when Relativity canceled development of the Terran 1 that was supposed to launch them!
Bouncing back from Terran 1
Contract losses of that magnitude might have sunk a lesser space company -- but not Relativity Space. In fact, as the company announced earlier this month, Relativity has already replaced that work and in fact grown its order book to $1.8 billion this year, spread across nine separate space company customers.
As Relativity advised, the newest of these customers is Intelsat (formerly a big SpaceX customer), which has signed a "multi-year, multi-launch Launch Services Agreement" with Relativity to help grow Intelsat's fleet of nearly 60 satellites already in orbit. And yet, the details contained in this press release raise some questions about Relativity -- and about its ability to truly challenge space launch leader SpaceX, and compete effectively in the market for heavy-lift rockets.
More questions than answers
Neither Relativity nor Intelsat has said precisely how many launches Relativity will conduct, or how much it will charge per launch -- but that doesn't mean we can't make some educated guesses.
Begin with the difference between $1.65 billion in contracts across eight customers (that Relativity described in April) and the new tally of $1.8 billion in contracts spread across nine customers (today). This implies a change in dollar value of only $150 million -- barely enough to cover say three launches (the bare minimum for a "multilaunch" deal) across three years (the bare minimum for a "multi-year" deal), if Relativity is charging $50 million per launch (the simplest way to reach the $150 million change in launch contract value between April and today).
Granted, it's possible Relativity has agreed to launch more than three rockets for Intelsat. But if the total price for these launches is $150 million, this would imply it's charging even lower launch prices -- $37.5 million per launch for four launches, for example, or $30 million per launch for five, or $25 million per launch for six.
Any of these prices would explain investor enthusiasm for signing up with Relativity Space versus SpaceX, which currently is the lowest cost large rocket launcher in the U.S. or Europe at an advertised cost of $67 million. But any of these prices -- and especially the smaller ones -- make one wonder how Relativity could possibly undercut SpaceX's prices and still earn anything resembling an attractive profit margin on its launches.
My guess is that it won't earn a profit at these kinds of profits. But that may not be the point.
When will Relativity Space IPO?
Recall that right now, Relativity Space is a rocket company without a rocket to launch.
It's a rocket company that won't have a rocket to launch for three more years, competing against at least two other companies (United Launch Alliance and Blue Origin) that are planning to launch their newest rockets in late 2023 and late 2024, respectively, and more importantly, against SpaceX, which has two rockets already in service, and a third -- Starship -- that could make its next launch attempt any day now.
In the absence of any rockets to launch, there's little point in Relativity Space worrying about the profit margins it might earn on hypothetical launches. Instead, it needs to focus on launching press releases promising future launches -- that may or may not happen, and may or may not reach orbit when (if) they do happen.
Unless and until that changes, I wouldn't hold out much hope of a Relativity Space IPO -- and I'd be very cautious of investing in such an IPO even if it does happen.
Caveat investor.
