Shares of Astra Space (NASDAQ:ASTR) stock are plummeting today after Kerrisdale Capital released a 26-page short report on the company. Astra became a public entity this year after merging with Holicity, a special purpose acquisition company (SPAC). Furthermore, Astra operates as a satellite and rocket launch services company with high aspirations to launch 300 rockets by 2025. However, the company faces a long road, as Astra has only successfully launched one orbital test flight since its inception.
Kerrisdale claims that Astra operates in a competitive market with goals that resemble “pure fantasy.” The New-York based hedge fund concluded that ASTR stock is a great short target through interviews with industry executives and proprietary research.
Let’s take a deeper look into Kerrisdale’s short report that has ASTR stock falling more than 9%.
Kerrisdale Releases Short Report on ASTR Stock: 9 Things to Know
- To start off, 91.2 million shares of ASTR stock will unlock tomorrow. Kerrisdale adds that this figure is twice the current float and may imply further downside risk and volatility.
- Additionally, Astra’s projected fiscal 2021 EBITDA guidance has decreased by 35% since the beginning of the year.
- It was expected that cash from the SPAC transaction could fund Astra until 2025. Now, the cash is only expected to fund the company until 2023. Kerrisdale believes that Astra will “almost certainly need to tap the capital markets in the upcoming year.” The hedge fund adds that Astra is burning through between $50 million and $60 million each quarter.
- Astra has yet to reach profitability and has only successfully launched one rocket into orbit after six previous failures.
- The company’s financial projections for 2024 and 2025 rely on 165 and 300 rocket launches, respectively. For context, 300 launches is almost triple the number of global launches in 2020. In 2021, competitor SpaceX set a record-breaking 31 orbital launches. Moreover, Kerrisdale believes that Astra’s business model and projections factor in an “ambitious, unprecedented, and frankly unrealistic launch cadence.”
- When asked about Astra’s projected 2025 rocket launches, an anonymous senior engineer at a launch broker said: “I laugh at that number…There’s no way they are doing 300 launches by 2025; by 2035 it would still be a stretch.”
- Kerrisdale claims that Astra is falling behind its competitors. After the completion of the SPAC merger, Astra signed a deal with competitor Firefly Ink to access its intellectual property (IP). Additionally, Astra uses off-the-shelf commercial parts to design its rockets, unlike its competitors who use reusable parts that can decrease expenses in the long term. As a result, Kerrisdale says Astra is vulnerable to price deflation.
- Competitors like Firefly Ink, Rocket Lab (NASDAQ:RKLB) and Relativity all have plans to produce 1,000-kilogram rockets in the near term. Meanwhile, Astra has plans to create a 500-kg rocket two years from now.
- Astra is Kerrisdale’s second space short in 2021. The hedge fund published a short report on Virgin Galactic (NYSE:SPCE) earlier this year. Shares of SPCE stock are down roughly 60% since.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.