Space industry warned to prepare for impact from lurking recession

Tory Bruno: ‘I think we’re really looking at a sea state change’

WASHINGTON — Some companies in the space industry may not survive the coming headwinds in the U.S. and global economies, United Launch Alliance CEO Tory Bruno said July 11.

“I think we’re really looking at a sea state change,” Bruno said at the Space Innovation Summit, an online event

Economists and financial analysts are predicting an economic slowdown. Quilty Analytics, a market research firm focused on the space industry, noted that there were no public equity financings completed during the month of June. “We expect the slowdown in public capital markets activity to continue, at least in the near-term, until market volatility remains subdued for a sufficient period of time,” the company said in a report.

The current environment is driving investors to pull back from riskier ventures, including those in the space sector, said Bruno. 

“What we’ll see now with interest rates up in a recession is a lot more focus on what we invest in,” he said. “So we won’t see companies with dubious business models necessarily being invested in.”

Now investors are “being very, very careful about the companies that can really make a difference and understand their market and have technologies that change our country’s capabilities in the marketplace,” Bruno added. “In the past, we have been in an environment with low interest rates, meaning that cash was cheap, it was plentiful, and therefore there was a lot of investment in a lot of different things. That will change.”

A realignment in investments is “not all bad,” said Bruno. “In the environment we had before, there wasn’t a lot of discipline around that investment.”

“Anything that sounded great was something to be invested in, it led to a strategy of investing in ‘interesting sounding companies’ … if one makes it you’ll be fine. You’ll trade on the valuations of the others as long as you don’t wait too long to get out,” Bruno said. 

What likely lies ahead is a shakeout and consolidation, and some companies may not survive, he said. “There may be some companies that would have been great to have saved. But the ones that do get invested in are going to get a lot more attention and have a better chance of surviving.”

Innovation in space launch

Despite economic headwinds, the United States has a healthy space industry that will continue to thrive and innovate, Bruno said. “The good thing for our country’s position right now is that we do have a broader industrial base for launch, as well as for spacecraft and technologies.”

ULA is expected later this year to fly a new rocket, Vulcan Centaur, which was designed for the national security market and also won a big commercial contract to launch Amazon’s broadband constellation. Once Vulcan starts flying, Bruno said, the company plans to invest in upgrades, primarily on the upper stage so it can be used for in-space transportation. 

In these uncertain times, the challenge for space companies is to strike a balance between short-term and long-term goals, Bruno noted. 

“Where you get into trouble with not innovating for the future or not thinking about the future is where we’re going to have a situation with activist investors or boards,” he said. There has to be a balance between near term results and the long term health of a company,” Bruno said. “And really what you have to do as a CEO and as a management team is to stay focused on understanding the long term trends in the market and what it will take to continue to be a leader in your specific field.”

“It can be tough,” he said. “It depends a lot on the makeup of who your investors are, who is sitting on your board, but you just got to stick to it.”

Role of government

Dan Hart, CEO of Virgin Orbit, said “there is enormous opportunity right now” for the U.S. government to leverage commercial space and ensure innovative technologies don’t fall by the wayside. 

Virgin Orbit launches small satellites from rockets that are deployed from a Boeing 747 aircraft. 

“I think that the government needs to evaluate, select, nurture on a cyclical basis,” Hart said July 11 at the Space Innovation Summit.

“There’s capital coming in, there are ideas that are being developed. But there is that chasm of death that we’ve all learned about,” he said, referring to the difficulty of transitioning technologies from research projects and prototypes to government procurement programs with long-term funding. 

“Government can be a major source of strength in pushing across that,” he said.

“There’s a huge amount of innovation going on in the industry and we’re training an entire generation of space professionals,” Hart said. “And that will be one of the biggest things that comes out of this era.”

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