Terran Orbital (NYSE:LLAP) stock surged as high as $3.41 this morning after receiving a massive $100 million investment from Lockheed Martin (NYSE:LMT). After that high, LLAP stock closed the day at $2.62, up more than 2%. In exchange, Terran will provide Lockheed with convertible notes and warrants. The company engages in the development of small satellites and satellite-based solutions, primarily serving the U.S. and its allies.
Terran will provide Lockheed with warrants to purchase 17.25 million shares of LLAP stock at an exercise price of $2.89. The price will factor in a 15% premium. Meanwhile, Lockheed will receive convertible notes at $2.89 — factoring in a 15% premium as well — that will mature on Oct. 31, 2027. These notes are convertible to about 34.5 million shares of common stock upon issuance and will carry an interest rate of 10%.
Lockheed’s investment will contribute towards satellite assembly space, increased module production and other working capital expenses. Terran CEO Marc Bell added the following about the deal:
“This is a continued expansion of our collaboration with Lockheed Martin, and complements and accelerates the decision Terran Orbital made amid the lingering supply chain crisis to continue to vertically integrate products and components to facilitate full in-house satellite and manufacturing production.”
As part of the investment, Terran’s manufacturing capabilities have been accelerated and will now be based in Irvine, California. The company has “added over 140,000 square feet in Irvine alone in the past 12 months.”
LLAP Stock: Terran Orbital Receives $100 Million Investment From Lockheed Martin
Along with the investment, the two companies have also entered into a strategic cooperation agreement (SCA).
The SCA will last until 2035 and provide the two companies with synergies through shared expertise and relationships. Furthermore, the SCA will help with affordability through innovation, speed of solutions for mission-critical customers, and “mission assurance at both the satellite and constellation architecture level.”
Terran also stated that it is placing an emphasis on advanced satellite imagery in light of the war in Ukraine. As a result, the company will halt efforts to create its own satellite constellation. Instead, Terran will work on imagery through a product line based on its PredaSAR satellites. Terran will also focus on payloads, “high reliability satellite subassemblies” and “mission operations for satellites using Terran Orbital and partner ground networks.”
LLAP stock is down more than 70% year-to-date (YTD), although the Lockheed investment serves as a stamp of confidence from an established defense and aerospace company. Terran Orbital will report earnings on Nov. 9 and share more details related to the investment.
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On the date of publication, Eddie Pan did not hold (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.