Is Astra Space Going Out of Business?
For smaller rocket companies, they are tasked with the significant challenge of creating a launch vehicle capable of reaching orbit consistently. This process is not only immensely difficult, but also very expensive as you are bound to have failures along the way. Astra Space is a company that has been trying for years to create a small lift launch vehicle with the ability to reach orbit and deliver payloads.
Unfortunately for the company, this process has not gone the smoothest with quite a few failures stopping Astra in their tracks. Toward the middle of 2022, the company canceled its Rocket 3 line after a 7th failure. Even though this vehicle was able to reach orbit more than once, they knew they needed a system that could keep launching without issues.
This being said, the process of developing an entirely new rocket is also a very expensive process. Just days ago news came out that Astra defaulted on one of its loans, a bad sign for the company’s future. Here I will go more in-depth into Astra’s current finances, progress on its new rocket, what the future holds, and more.
Loan Default
A few days ago, Astra disclosed in a securities filing that it defaulted on a recent debt agreement and may not be able to raise the needed cash. Specifically, Astra revealed that it had triggered a default on a $12.5 million loan it secured in August from an unnamed institutional investor when its cash on hand fell below minimums required by the loan agreement.
The filing highlights that “the Company is required to have at least $15.0 million of cash and cash equivalents in one or more deposit accounts subject to one or more control agreements entered into in favor of the Investor”. They then say, “Beginning on October 11, 2023, the Cash Requirement was not maintained by the Company in accordance with the terms of the Note”. In this case, the investor agreed to waive the default, provided the company kept at least $10.5 million in cash and cash equivalents on hand and made a $2.1 million payment. The interest rate on the loan also increased from 9% to 15%.
A few days ago on the 1st, the Company paid the Investor a scheduled amortization payment in the amount of approximately $3.1 million, consisting of the $2.5 million amortization payment paid at the 115.0% event of default rate, plus accrued and unpaid interest at the Default Interest rate. Even with this payment, the aggregate principal amount outstanding under the Note is still $8.0 million.
Obviously, Astra is running low on funds and needs more and quickly. Recently the company said it’s in “continued discussions” with other investors about financing, but could not guarantee it could close any deal, or that the terms of any funding would be the same as what it disclosed in October. In addition, earlier this year the company laid off a quarter of its workforce between the beginning of July and early August. This delayed work on Rocket 4, among other projects the company is working on.
Astra now finds itself in somewhat of a desperate position. They need money badly but the only thing that would realistically convince investors is a working launch vehicle. As of right now, Astra has only completed pre-launch tests such as pressure tests on the rocket’s tanks. In reality, they are likely still quite far from an initial test flight.
Earlier this year in an earnings call, the company projected that it would have around $15 million to $20 million of cash on hand by right about now. Company executives said both the August loan and a planned “at-the-market” sale of stock would help buy the company time to secure a strategic investment. However, shares in Astra fell nearly 19% in aftermarket trading just days ago. Back in September, the company performed a 1-for-15 reverse stock split to get the company’s shares above a $1 threshold required by Nasdaq. This was necessary to ensure the stock wasn’t delisted. Unfortunately, despite the split, shares have since fallen back below $1. With all things considered, Astra is running out of options and desperately needs to get hardware in the air if they want to stay afloat.
Rocket 4 Production
Earlier this year Astra was actually making quite impressive progress on Rocket 4. Pretty frequently we were receiving updates on tanking tests, engine static fires, and Rocket 4 mock-ups, just to name a few. For example, around that time, Astra announced that it would no longer be working on the upper-stage engine of Rocket 4. Instead, they have completely outsourced the work to a company whose sole purpose is to create high-quality rocket engines. Looking at past launches, there were a few different examples of problems related to the upper stage and specifically the upper stage engine. The goal of this partnership is to allow Astra to focus on other aspects of the rocket while Ursa ensures they provide a capable and reliable engine.
The specific engine named the Hadley ITV, is a 6500-pound thrust engine and is an upper-stage version of the company’s Hadley engine. Designed to operate in a vacuum and has a restart capability to support that. During the Spacetech day presentation, Astra CEO Chris Kemp was quoted saying, “We’re really excited to announce that partnership because it allowed our team to focus all of our energy on the first stage engine and the rest of this very complex system.”
In addition to the development of the upper-stage engine, there was a lot of talk surrounding the factory and changes made to the manufacturing process. Astra calls it the Rocket Production line which was only just completed. Kemp commented, “It takes a coil of aluminum on one side of the building and it processes it through various stages and rocket stages come out the other side of the machine. This will allow us to drive the cost of the primary structure of the vehicle down like a giga factory presses drive the cost of the vehicle down, literally pressing primary structures out of sheets of metal and taking rolls of metal and turning them into the tanks of the vehicle” he said. This new system will be applied to Rocket 4 and is said to be capable of producing up to 1 rocket per day.
They also announced that they doubled the capacity of their shop, built new test stands, a quality control lab, and are testing engines much more. Most importantly, last year when Astra revealed the new Rocket 4 launch vehicle, they stated that test flights would begin in 2023. In regard to this, Chris Kemp said, “The team knows how critical that we return to the pad and test this system, so we are working tirelessly to drive towards test flights by the end of the year.” However, he proceeded to talk about the company’s new focus on success rather than schedule. In other words, they would rather take their time and be successful than rush and fail to deliver the mission payloads. This suggested that the first launch of Rocket 4 could be closer to early 2024 rather than late this year.
The most recent update was two months ago in September when the company tweeted saying, “Fresh hardware coming off the Rocket Production Line before leaving for testing.” This included an image and video showcasing the production process.
Already this year there have been a few important tests on both the structure and main engines of Rocket 4. Starting in January, they performed a pressure test on a new tank design. Test Tank 1 met all testing objectives and allowed the team to move into qualification tank builds of both the first + upper stage which now shares a common size. Then that same month Astra announced the Rocket 4 first stage engine completed a full mission duty cycle of 175 seconds. Lastly, in March, they completed the first hot fire using the thrust vector control (TVC) system for Rocket 4’s first stage engine. The TVC is the mechanism that allows us to control the direction of the thrust for the rocket used by our Guidance Navigation Control (GNC) systems.
Astra points out that Rocket 4 builds on the heritage, flight-proven designs, and manufacturing techniques of hundreds of subsystems demonstrated during the successful orbital flights of the 3 series rockets, but there are several key changes to the Rocket 4 architecture. Rocket 4 will stand 62 feet (19m) from tip to tail, with a total diameter of 6 feet (1.8m). This overall size increase allows the vehicle to carry greater volumes of propellant, and in turn, deploy significantly more payload mass – with a target payload capacity of 600 kg to mid-inclination 500 km low Earth orbit over the course of the product lifecycle. While all these changes are great, if the company doesn’t have money to create the rocket, then we will never see them in action.
For the past couple of months, we haven’t heard much regarding Rocket 4 and instead, the company has provided updates on the Astra Spacecraft Engine, a separate part of Astra’s business. A launch of Rocket 4 this year would have been a big deal and possibly a turning point for the company. Unfortunately, the lack of updates suggests that they still have a ways to go and even if the proper funding was available, it could be a while before we see an actual launch. Something we will have to keep an eye on in the coming months.
Conclusion
Astra Space is in a rough position after an SEC filing revealed the company had defaulted on a loan. It showcased that Astra is low on cash in a business where money flies out the door. The company needs to get Rocket 4 up and running if they want to stay above ground. We will have to wait and see how it progresses and the impact it has on the space industry.