Analysis of Momentus Space (SRAC)

What happens when you find a blue ocean in outer Space?

“Don’t compete with rivals, make them irrelevant”

- W. Chan Kim, Author of “Blue Ocean Strategy”.

If we ask a common man to think about Space, he may think about scenes he remembers from Star Wars or Star Trek. However, a lot has changed in Space Technology especially over the last decade, making space launches efficient and cheaper. This New Space Age is driven by improvements in technology resulting in re-usability of space rockets, that has driven down the cost of launching payloads in Space. Such cost is expected to go down several fold in the coming years, as large rockets like SpaceX’s Starship and Blue Origin’s New Glenn go commercial. However, one aspect of space travel that people are not familiar, is the amount of work required to transport satellites in space to the target orbits after leaving the rockets at Low Earth Orbit. The company Momentus Space, with its unique proprietary technology of Microwave Electro Thermal (MET) Water based Plasma propulsion, stands to gain a tremendous advantage here. Momentus is establishing itself as an early leader in the high growth area of Orbital Space Transport Infrastructure.

Their business is a Blue Ocean, that we have found in outer Space. Let us navigate this ocean and understand its depth and vastness while also understanding the risks, of this new space investment voyage.

Introduction

There are a lot of people among us who still believe that making Space easily accessible to Humans is an impossible dream. This belief, however, is not based on any facts. There is no constraint from laws of physics that requires spaceflight to be very expensive. The energy per unit mass required to send an object from ground to a low earth orbit (LEO) in Space is about nine kilowatt-hours per kg. At a typical price of $0.08 per kilowatt-hour, this amounts to a cost of $72 to send an eighty-kilogram person with twenty kilograms of luggage to the space station. The energy to send a spacecraft to orbit is about same as what is required to fly a jet roundtrip from Los Angeles to Sydney. Right now, such round-trip flight tickets cost around $2000 per passenger. Yet a few private tourists who have been able to afford space travel have paid ten thousand times that amount, with bill to taxpayers for launching astronauts costing even more, as much as ten times greater. That is a whopping $200 million per passenger.

So obvious question is, why the price has been so extremely high historically. One reason why space launch cost more that air travel is that aircraft is reusable while space launch systems are expendable. A Boeing 747 seats four hundred people and costs $400 million. If planes were used once for every flight, the ticket price round trip would have to be at least $2 million each. So clearly if space launches were to be made economical the vehicles employed will have to be reusable. But they were not for several decades (since 1960s), despite us flying to space orbits for 60 years and spending hundreds of billions of dollars. Why? A large part of the reason is how institutional structure was set up for governance of space programs.

Historical Challenges to Progress

The central issue to institutional space progress has been the system of cost-plus contracting that the government has put in place in the false belief that the price of hardware could be best kept under control by regulating the space contractors and making them charge for their documented costs plus a modest pre-set profit margin (around 8-10 percent). However, this system forces contractors to increase their costs, by requiring armies of administrative personnel to document elaborate billings and incentivizes them to do so, since the more overhead they incur, the more gross profit they make (as profit is applied as fixed percentage of total documented costs). This is in complete contrast to how business is done in private sector where customers care for how much they have to pay for the product and not the actual cost incurred by the vendor. In the free enterprise, vendors focus on reducing the cost to increase profit margins. But in cost plus contractor world, the profit is made by increasing the cost. At major aerospace companies this used to be done all the time. As a result, it was the norm for such companies to have overhead rates exceeding 300 percent. Quoting author from the book “The Case of Space” below -

“Indeed, at the Martin Marietta company (later Lockheed Martin), where I was employed from the late 1980s through mid-1990s (and which was, along with Boeing, one of the two most successful of the eight major aerospace companies of that era), we at one point had more than thirteen thousand people at our primary facility, with fewer than one thousand working in the factory—leading one wit to scoff, “At Martin Marietta, overhead is our most important product.”

To explain further using author’s example, this inflates prices of everything leading to extreme high cost of space launches. For example, due to high overhead if the cost of space launch is inflated to $100 million, then the price of the equipment like say the Satellite matters less as it is a smaller component of overall cost. So, whether price is $20 million or $1 million of the satellite, it impacts total cost by only 20 percent and companies cared less anyways as they get a higher gross profit for higher expenses incurred. There was very little incentives to take any risks by trying out new innovative space equipment that reduces the cost but being new was a little more risky than conventional 10x more expensive equipment. This is what has been happening in government-controlled space programs for decades since 1960s and re-usability of components, innovation driving cost of space launches were all stifled.

That is until SpaceX came to the picture and changed the entire game.

New Space Opportunity

“The Commercial Space Age Is Here…In our recent research, we examined how the model of centralized, government-directed human space activity born in the 1960s has, over the last two decades, made way for a new model, in which public initiatives in space increasingly share the stage with private priorities…SpaceX, which in its first twenty years has entirely upended the rocket launch industry, securing 60% of the global commercial launch market and building ever-larger spacecraft..” -Matt Weinzierl and Mehak Sarang, Harvard Business Review, Feb 2021

With the advent of SpaceX and entrepreneurial spirit, space innovation got a new lease of life. New Space companies got started mostly by private money from the billionaire entrepreneurs like Musk, Branson, Bezos. The focus became to reduce the costs of space launches through innovation. Instead of creating overheads running at 300 percent, these companies started moving them down to 20% percent range that is typical of private companies. Also, SpaceX innovated, experimented and successfully deployed reusable rockets in Space launches bringing down the cost of launches several folds. There has been constant progress on this front and launch cost of payload per kg keeps going down from $20,000/kg to $2,700/kg to LEO. With SpaceX planned commercial launches using Starship from 2022, the cost per kg is expected to fall below $1000/kg and can possibly go down to $200/kg at one point. The consequences of cheap space launch is revolutionary. The rate of progress of space technology moves from linear to exponential. An ecosystem is created with many players experimenting, innovating and developing newer applications using all possible space-based use cases for human consumption. Not to mention this paves the way for humans to travel to space more routinely bring space travel much closer to current air travel standards both in cost and safety. This exponential cost reduction is happening as we read this, and the revolution has begun for students to send cube satellites in space or for a small scrappy start up to dream big creating space applications for world’s use by sending their satellites to space at low cost. In the middle of all these space launch companies, we also have companies that make it possible to transport the satellites in space and deploy them in the correct orbits. And the star among them all, is a company called Momentus Space.

Momentus Space - Company Overview

The company was founded in 2017 in Santa Clara, California and came out of the prestigious Y-combinator incubator program. Biggest investor in the company is Prime Mover Labs whose LPs (Limited Partners) include the likes of Bill Ackman, Joe Lonsdale of Palantir, the Lerner family, Tony Robbins, top Hedge fund manager Dmitry Balyasny, Joe Montana’s Liquid2 VC fund, among many other notable names. The involvement of top category of investment firms is a great validation of what Momentus has been trying to build for Space Infrastructure. According to Brian Kabot, CIO of SRAC (the SPAC merging with Momentus) on the investors from Prime Mover Labs - “..they have been incredibly supportive investors, really helping institutionalize this company, that still a very young company, but in a short period of time have become a strategic partner to SpaceX, have customer contracts with NASA and Lockheed Martin. So, just this whole confluence of dynamics created a very attractive target for our SPAC…And what I think is great for the investor is we did four months of due diligence. We spent a lot of money with some of the top service providers out there from Stellar Solutions to Kirkland and Ellis, from Orrick to Evercore to cantor completing our underwriting, right, we did four months of due diligence, which in a traditional ipo you would never have the opportunity to do”

The company is a manufacturer of Orbital Transfer Vehicles using its proprietary MET water plasma propulsion technology. This technology is groundbreaking and as we will see soon, reduces cost, is fast, safe and reusable. This is patent protected with Momentus having filed 14 US and International (PCT) patents that describe 70 distinct innovation covering all unique aspects of the technology developed by the company.

Momentus, is not in the business of selling their propulsion vehicles and instead in the business of providing services for space transport including last mile delivery of satellites to target orbits. This way they are more like Uber for Space transport. This means the contracts are structured in a such a way where the satellite operators pay Momentus a fee per unit of weight, for satellites to be launched from the ground to the proper orbit. In most of these cases, Momentus will share a part of the fee with the rocket launch provider, say SpaceX while keeping the rest as their main revenue. A key point to note here, is that throughout the process, Momentus owns the orbital transport vehicle and after transporting the satellite to its target orbit, it can stay in space for a re-use at a later point of time. This means at some point when Momentus starts re-using these vehicles for periodic orbital transport, then the revenue becomes recurring per vehicle and higher margin quality. Later when there are other opportunities like satellite servicing in space, the business becomes even more lucrative. Finally, this reusability of vehicles in space for orbital transport become one of the biggest moats, presenting to us one of the real blue ocean business strategy at play in space.

Momentus is already building version 2 of their first vehicle, Vigoride, which results in significant higher payload capabilities and lower vehicle cost. Momentus’ next generation vehicle Ardoride (and later Fervoride) will be fully reusable and capable of carrying much higher payloads at higher speeds, have robotic arms on craft which will also enable in-orbit servicing.

Instead of repeating all aspects of the company’s products, plans, financial estimates here, a very comprehensive understanding can be obtained by an investor by reviewing the company presentation from December 2020. Here is the link

Also, there are video tours ( March 2020) of Momentus office facilities available on Youtube given in the below link here . Also a 2019 Nasa iTech presentation video of Momentus that is informative can be found here

Momentus - Understanding Technology

“We developed a novel plasma microwave propulsion system that can use solar power as an energy source and water as a propellant (simply as a reaction mass) to propel our vehicle in space. The choice of water also makes our space vehicles extremely cost-effective and simple.”

-Mikhail Kokorich, Founder and Former CEO of Momentus Space

For a rocket to launch from earth to space, it needs propulsion. A rocket uses chemical propulsion in order to go to space. Chemical propulsion has high thrust but also very inefficient in how it uses the energy. Such high thrust is needed for a rocket to escape earth’s gravitational force. But being inefficient, a lot of fuel needs to be burnt to produce a unit of thrust. This measure of fuel efficiency is called Specific Impulse or ISP. Chemical propellants have high thrust but low ISP.

Once the rockets get into orbit, the nose cone opens and the payloads containing satellites will be ejected from upper stage of rocket into space. A satellite once separated from the rocket has to move in space and make its way to the target orbit for which it has been planned to operate. For satellites to do this, they need some kind of in-built propulsion technology providing thrust or a specially designed Orbital Transfer vehicle providing the thrust in this space transit. The key concept here is that while it makes sense to burn a lot of fuel to launch the rocket from earth to space, it makes little sense for the rocket to continue to burn fuel expensively placing each satellite in the target orbits. It is much more economical to use some kind of orbital transfer vehicles in space using energy more efficiently while providing some level of thrust to move the satellites. Electric propulsion while providing low level of thrust, is far more efficient (higher ISP) than chemical propulsion and is currently used for this purpose. Electric propulsion generates thrust as low as the equivalent weight of a piece of paper on earth but needs far less fuel for movement. In space this works as there is no large gravitational force in play and being in vacuum creates no additional frictional forces. Thus, Orbital Transfer Vehicles are a very necessary part of space travel. Virtually no satellite is deployed into its final orbit by a rocket.

Earlier for decades, due to the challenges in space innovation and cost control discussed earlier, the cost of launches was enormously high and despite the larger cost of using chemical propulsion to deploy satellites in space by rocket, they continued to be used with no consideration to cost savings that can be achieved by using electric thrusters to do the job in space while rockets leave the payloads in Low Earth Obits of Space. But after SpaceX and others came, this started to change and by early part of last decade, electric propulsion began to be widely adopted by satellite operators that lower the cost of launching and deploying satellites in space.

A typical electric propulsion system has two components. A propellant system providing the thrust and a power processing unit that is responsible for generating energy that is needed to have the propellant system create the thrust. For electric propulsion systems the power is almost always coming from solar arrays that uses the sunlight, which is abundantly available in space. The propellant system typically is a gas (xenon, krypton) or liquid (hydrazine, or in case of Momentus, it is water). The system works in such a way that the solar electricity from solar arrays is used to heat up the propellant which is then expelled from some type of nozzle to produce thrust.

The most prevalent electric propulsion system used in orbital transfer currently are Hall Thrusters (krypton gas powered propulsion for example) which have very high ISP (efficient) but low thrust (however good enough to move satellites slowly in space to their target orbits). So, while Hall thrusters require less propellant (hence lower mass needed for vehicle), they are extremely slow due to low thrust generated. They generate thrust in short low-powered impulses and takes months for a satellite to reach its target orbit after leaving the rocket.

Momentus Space solves this problem of low thrust (and hence low speed) to a great extent while providing a trade-off on ISP (it has lower ISP than Hall Thrusters and hence needs more propellant - water in case of Momentus). This has huge implications. Momentus has created Orbital Transfer Vehicle ( e.g Vigoride) that uses a proprietary technology based on Microwave Electro Thermal ( MET) thrust and water based propulsion generating plasma to provide a much higher thrust than the current prevalent Hall Thrusters.

Thus, Momentus technology by using microwave electrothermal electric propulsion and water as propellant, is able to provide orbital transfer services to satellites with a larger thrust of 3-10X than currently available other Electric propulsion systems including Hall Thrusters that are commonly used. The costs of Momentus Orbital Vehicles are much cheaper because it uses water as fuel versus the more expensive (Xenon or Krypton). It is safer because water is not a reactive substance. It is safer, cheaper and also much lighter than chemical propellant systems that needs to burn a lot of fuel to generate thrust because it is 2-5X more efficient in fuel consumption. And finally, it is much faster than Electric propulsion systems like Hall Thrusters because of higher thrust. So cheaper, faster, lighter and safer striking a right balance compared to any other space transport systems currently available and in immediate development pipeline, is what makes Momentus the Blue Ocean of space transport.

Momentus Orbital Transport Vehicles

It is critical to understand the Orbital Transfer vehicle roadmap of Momentus. Currently, Vigoride has been built, tested and ready to launch with commercial payloads. Ardoride is the next vehicle in development and planned to be commercialized by 2022. Fervoride, seems to be in design stage. We can think of Vigoride as a Sedan, Ardoride as a SUV and Fervoride as a Truck carrying varying number of loads with increasing levels of distance in space.

Investment Thesis

“U.S. economy is obviously fairly starved for growth, we’re very long in a cyclical recovery here and space is probably the most interesting and unique growth avenue in the U.S. economy, we're looking at $415 billion in revenue today, projected to grow to $1.4 trillion by 2030 according to Bank of America. When we started looking in the space industry, what we really set out to do is merge with a high-quality value-add business, kind of a pick and shovel business that could win regardless of who ultimately wins that space race, and Momentus is really the key to commercializing and industrializing that space economy….…And it's really all predicated on a patented and proprietary water plasma propulsion technology, which is the cheapest, most efficient propulsion technology for maneuvering around in space. So, I think of it as the uber pool of the satellite industry.

- Brian Cabot, Chief Investment Officer, Stable Road Acquisition Corp ( SRAC)

Following are the key aspects of my investment thesis in Momentus Space.

Strategic Partnership with SpaceX

Momentus has a strategic partnership agreement with SpaceX. The exact details of this partnership agreement is confidential and all indications are that it is very extensive, long term and a mutual win win for both parties. SpaceX has their main focus on making space launches cheap and making space more accessible. Momentus helps them in complementing the low-cost launches with cheaper, faster and safer ride-share options for satellites compared to anyone else. In many ways through this strategic deal, the success of SpaceX and Momentus are correlated. SpaceX has no plans currently to become a public company. Momentus becomes one way for us to be a part of this success. Besides SpaceX, Momentus has also done deals with Blue Origin ( Bezos) and Relativity ( currently private but most likely will end up as the best-in-class mid-market rocket launch company) and various other major rocket launch companies.

Superior Microwave Electro Thermal water plasma propulsion technology

Momentus represents a huge improvement from the currently used propulsion systems used in space to move satellites like the Hall thrusters. The first Orbital Transfer Vehicle from Momentus is Vigoride. For same input power, Vigoride generates around four times the thrust of a commonly used krypton-based Hall thruster making it several times faster in space transport. And because of a simpler architecture due to its use of water as propellant, the cost to build and operate Vigoride is much cheaper as well. Momentus has successfully tested the propulsion technology in space in 2019. The next launch (that got postponed due to a need to get government agency approvals) is planned in June 2021 with SpaceX, which will be their first commercial launch with paying customers.

Significant contracts won for future launches and a strong pipeline for new business.

Momentus has already won several new business deals valued close to $100mm even before its first commercial launch. These wins come from all types of partners ranging from small satellite operators, government contractors (Lockheed Martin) and government agencies (NASA). Such a broad base of clients indicates the strong demand for Momentus services. Besides signed contracts, Momentus has a strong pipeline of contracts under negotiation valued at over a billion dollars. Quoting Brian Kabot from his interview - “$90 million is fully contracted and then a portion are options that are written into the agreements. But in addition to that $90 million backlog, the company has built north of a $1 billion pipeline, which we think will have a very high conversion rate over the next few years.” All this, even before their first commercial launch (expected in June 2021 with SpaceX). I would expect the demand to intensify once the first commercial launch is completed.

Best-in-class unit economics that get even better when reusability starts.

Momentus has intense focus on cost control and has a low-cost design vehicle with possible plans of vertical integration that can drive down the cost of vehicles even further. One of biggest cost item is the fee paid to transport payload aboard rockets and that is declining. The strategic ride-share partnership with SpaceX will enable this cost to go down further once Starship starts commercial operation. Momentus conservatively estimate this to happen in 2025 which is likely going to happen in 2022. Once Momentus starts reusability of vehicles, they will be able to amortize the production and labor cost (which are already low at 25% of revenue) across multiple rides which will improve the unit economics dramatically. All this leads to a steady-state EBITDA margins in 60% range which is in excess of the projected steady state margins of best-in-class public space companies.

Declining cost of launching satellites in space creates inflection point.

“Only 70 satellites were launched in 2010; this year, the number is more than 1,000. Launch cost dropped almost ten times. The number of companies developing satellite projects increased at least ten times. Satellite operators are developing dozens of applications.”

- Momentus former CEO Mikhail Kokorich, Nov 2020

Space launches are at inflection point from low-cost unit economics, that is set to open the floodgates of satellite launches in space creating exponential demand for orbital transfer services from Momentus. Thousands of satellites are being launched into orbit currently compared to historical average of less than 100 per year. The trend will keep accelerating with declining cost of launches as more and more use cases are discovered and applied.

Best positioned to capture In-Orbit servicing opportunities in Space

The declining cost of putting satellites in space, means more and more satellites will be orbiting the earth in the years and decades to come. As space gets more crowded, there will also be a need to provide in orbit servicing, like collecting debris from colliding orbiting vehicles and perform maintenance operations on satellites. Momentus plans to use future vehicles with robotic arms to perform such operations. This is a new business area that can develop significantly in future for Momentus. The vehicles would need to refuel in space with water and Momentus plans to create a water-depot in space in future for refueling. Initially such water depots for replenishing water in the Momentus vehicles can be transported from earth. But eventually Momentus plans to procure the water from the abundant supply of water that exist on the surface of Moon, Mars or asteroids in the form of ice. Momentus (per their current CEO) do not plan to do such water mining themselves but use other third-party companies who may specialize on the water mining front. This entire re-usable ecosystem presents a distinct advantage to Momentus. Water is abundant in space and is safe and easy to move and refuel compared to gases like krypton and other fuels that power the competing options.

In-Orbit servicing can be a significant market opportunity over the next decade. By some analyst estimates conservatively, this can be a USD 4B opportunity alone by end of this decade. The in-orbit maintenance services can include functions like refueling and repairing satellites, repositioning or de-orbiting satellites or performing life extension services that will extend the service lifetime of an older satellite. Momentus is best positioned to capture this new blue ocean opportunity given that it plans to keep its orbital transport vehicles in space after mission completion and reuse them in future. No other companies that I am aware of currently plans to start similar reusability missions in space in the foreseeable future. It is possible that competitors can create re-usable vehicles but the cost to do space rendezvous which is bringing two orbital vehicles together to transfer propellant, can be much higher than Momentus given the complex power design and fuel system used by the competitors.

The Green Factor - Momentus’ water based propulsion is environment friendly

“Many satellite propellants also create considerable environmental or space debris risk. For example, mercury is a chemical element used by some propulsion companies in their systems that will eventually contaminate Earth's atmosphere with its neurotoxins. Chemical satellite propellants or high-pressurized gasses for electrical propulsion could also create a risk of explosion and debris hazards…The space debris problem could become critical in the next several years. The primary source of the debris is not the collision of satellites but explosions of residual fuel in upper stages. Momentus uses the safest, low-pressure propellant you can imagine: water. Water as a propellant has minimal environmental and debris creation risk”

- Momentus former CEO M. Kokorich

This is a key aspect of my investment thesis in Momentus Space. While superior thrust, efficiency and lower cost make Momentus almost an automatic choice for in orbit transport for customers, the environment friendly factor will ensure Momentus gets a preference across governmental space agencies like NASA and large government contractors like LockHeed Martin and also environmentally conscious space companies. The strategic partnerships momentum displayed by Momentus and large contracts already won is an early sign.

Top notch management and team.

The depth of experience of executive management team at Momentus is very impressive despite the departure of Momentus Founder and former CEO Mikhail Kokorich. This gives me confidence that Momentus will continue to execute and innovate in the years ahead.

• Dawn Harris, CEO - Proven leader in Global Space Industry who has steered operations at all levels in Momentus since 2019. Previously held executive positions at Boeing Satellite Systems International, Space Systems Loral ( now MAXAR), International Launch Services ( ILD) and others. She started as an engineer, designing space hardware.

• Fred Kennedy, President - Proven track record in leadership and innovation in the Space Industry. Was the inaugural director of US Department of Defense Space Development Agency . Have also been in leadership roles in DARPA, Avascent and General Dynamics. He also played a role in Obama administration as a Space Policy Advisor. Most recently before joining Momentus he was in Astra ( which also announced a SPAC merger recently). MIT alum.

• Jikun Kim, CFO - Previously served as CFO of FormLabs, EMCORE, Merex, AeroViroment and Raytheon Vision Systems. Interestingly he also has two degrees in engineering.

• Rob Schwartz, CTO - Responsible for the vision and technical direction of the full line of Momentus products. He has a background in spacecraft systems engineering and management. Prior to joining Momentus, he was the CTO at Maxar Space Division. He has double degrees from MIT.

To quote CEO Dawn - “If you talk to any of us individually, you would find a lot of very interesting similarities about the way we view space and I want to say about space and about vision is that there are a lot of companies out there but I have not met a single one that really has a grand vision about space and what it can be and how we can be the catalyst for the development and the acceleration of businesses in space. We are committed to this ( as a team) and what makes us tick and why we have ultimate optimism about our futures.”

Behind this management team outlined above, there are 110+ other people with dozens of PhDs . The team consists of VPs of Innovation, Chief Development Officer, Chief Engineer, VPs of Business Development, Program Operations and Head of Future Architectures among others. Glassdoor employee reviews are not many but mostly positive that talks about good culture, fast paced and not much bureaucracy, with the team focused on solving difficult problems. Ultimately, a lot of Momentus’ success will depend on the execution and understanding the composition of the team was critical for me. It will be difficult to say, if Founder’s departure will have an impact of Momentus going forward but I have heard that the company’s business in fact accelerated, as also evidenced by recent deal announcements in press releases. Given the reins of the company is in competent hands, I feel comfortable investing in Momentus despite the recent departure of founder.

Key Space Mission Partnerships with NASA and Lockheed Martin

Momentus has been a key partner in some of the NASA missions to explore the frontiers of the space technology. This is key, as it is a validation of strategic importance of Momentus to government space agencies. In 2019, Momentus announced that it is a major team member on a pioneering proposal that has been selected for award by NASA to build a prototype of the TransAstra Mini Bee™ asteroid mining vehicle. Momentus’ Vigoride™ satellite shuttle will join with the Mini Bee™ system to provide full space flight capability.

More recently, a few months back, Lockheed Martin was looking for a hosted payload service for its Nasa Tipping Point mission on cryogenic fluid management demo and selected Momentus, which will support the cryogenic payload transfer on Vigoride service vehicle after being launched from Relativity Space’s Terran 1 scheduled to occur in October 2023. Per Momentus CEO Dawn Harris, this is significant because Lockheed did not seek to do it themselves despite having the capability and in fact the way they described to her is that they could not win here with their own in-house solution and were very excited to have found Momentus for this and future missions. She expects additional business in future from Lockheed as a result.

New business that is not well understood can result in big upside..

Momentus technology, operating model and overall opportunity of orbital transfer services is not very well understood by investors. This creates a big opportunity to get in early before several launches happen establishing Momentus as a leader in the space. If it executes well on the current roadmap and projections, while achieving current estimated EBITDA of $1.2 Billion by 2025, then the company can get a valuation close to $15 Billion or $150 per share in 3-4 years ( by 2024 with NTM 12-13x 2025 EBITDA). This is just

Risks

Investment and execution to projected estimates is not without risks. These are especially high for a company like Momentus that is early in its journey of commercialization. We need to examine all risks carefully including going through Risk Factors section of the SEC filed prospectus. However, I have highlighted a few risk factors that have been most important to me.

Pending Department of Defense Approvals

Given the importance of Space missions to US defense, Momentus faced some additional scrutiny from Department of Defense due to the Russian citizenship of its founder and CEO Mikhail Kokorich who has since then resigned to address the concern. In a new SEC filing on Mar 8, Momentus said that on Jan. 21 the company “became aware of correspondence from the U.S. DoD stating Momentus posed a risk to national security as a result of the foreign ownership and control of Momentus by Mikhail Kokorich and Lev Khasis and their associated entities.” This led to Kokorich’s resignation as CEO and other measures, including the voting trust by Kokorich to divest shares.The company also submitted a voluntary notice to the Committee on Foreign Investment in the United States (CFIUS), which reviews certain foreign investments in American companies. CFIUS formally started a 45-day review of Momentus that is scheduled to end April 12. More details in this link.

I have looked at this risk closely. The informed opinions from my checks, is that the exit of Mikhail and Lev, addresses the primary concerns US DoD had and this should pave the way for approvals that are necessary for Momentus to proceed with the SpaceX launch planned in June. One early investor in Momentus told me that he believes Mikhail would not have agreed to relinquish control of a company he built without knowing with reasonable certainty that this could lead to the DoD approvals. I heard similar convincing arguments from others. If I have to assume, then my best guess is that approval from DoD comes by April/May and the SPAC merger happens soon after. Then Momentus goes ahead with the June SpaceX launch. However, this is only an informed assumption and the biggest risk in the whole investment thesis still exist which needs to be taken seriously. There is always a chance that the approval process gets further delayed which can impact the stock price and can potentially risk the merger itself.

Risks associated with a new technology

Momentus technology of microwave electrothermal water plasma-based propulsion is not fully functional in space. The technology itself was tested in 2019 and Momentus does have a small vehicle in space using the technology that is still running. However, so far, no commercial launches have been made with Vigoride yet, since the SpaceX launch scheduled in January had to be postponed due to the concerns raised by Department of Defense. I have looked at this risk in detail, checking the technological risk in the next June launch (subject to DoD approval). From my assessment, the risk of something going wrong in the launch is always present but not a deal breaker for me, given the extensive testing Momentus has performed in the past and the maneuvers planned by Vigoride in space on the June launch has been kept simple and more as a demonstration of capabilities post release of payloads in space. However, it is important to understand that the novel technology along with the pending approval from government agencies present a much higher risk profile for investment in Momentus than conventional software growth stocks that are already operating with multiple clients like say SnowFlake or a Twilio.

Innovation from competition

Momentus investor presentation has a detailed slide showing the different competitor product launch timelines, where Momentus clearlt stands ahead of competition. I am not planning to summarize that slide, however, suffice to say, that competition will come, given the large opportunity. However, Momentus is well ahead of the closest competitors, not to mention their current superior value proposition that makes a lot of current orbital transfer systems irrelevant.

I spent some time doing research from available research literature and other related company updates on the risk to the business model from future innovation in space propulsion technology especially for orbital transfer vehicles. Based on my limited review of of this topic and additional discussions during due diligence, I did not find a near term threat of a superior technology launching soon with better thrust, cost and safety combination profile compared to Momentus vehicles. The next few years can give a good head-start to Momentus which it can use to its full advantage. Momentus can also acquire innovative companies once they have become the established player in Space Infrastructure. However, threat of innovative disruption and future competition remains for any company that relies on its intellectual property and superior design for competitive advantage. This needs to be monitored periodically by an investor in Momentus. Over time, if Momentus executes well then, the barrier to entry can become higher and better unit economics driven by re-usability can create an effective long term business moat. Despite all this, Momentus is expected to keep innovating and make their orbital transfer technology more efficient and faster.

Conclusion

“No force on earth can stop an idea whose time has come” - Victor Hugo

As we saw earlier, we are at time when Humanity is finally ready to embrace Space to its fullest potential. Space is fast becoming the new frontier of innovation and experimentation. Quoting author of The Case for Space - “A century and a half ago, Horace Greeley advised Americans, “Go West, young man, Go West.” He was right. If you want to do something grand with your life, the frontier is the place to be. Today, the frontier is not the West but the sky.”

From an investment perspective, I like to participate in disruptive growth sectors, and I design my growth portfolio accordingly. I especially like it when the disruption caused by exponential declines in unit costs, unlocks vast new opportunities for growth and monetization. These are the blue oceans for me. The blue oceans that can enable the right leader in a space to grow exponentially. Needless to say there are risks that come with it. There are no free lunches in investment. But when we pick the right company having the best technology that is also cheapest, fastest while being safest and greenest, then you know, that you may have a big winner in your hands.

References : Company Filings, Investor resources, “The Case for Space” by R. Zubrin, Momentus management interviews, Inputs from early investors, Harvard Business Review, Forbes , Research Publication Literature review on Space Propulsion systems etc.