Space SPAC Sink: Terran Orbital Shares Plunge as Lockheed Martin Withdraws Offer
Shares of small satellite manufacturer Terran Orbital (NYSE: LLAP) plunged 17 percent in after-hours trading on Thursday after Lockheed Martin (NYSE: LMT) withdrew a $293 million offer to acquire the company.
Shares rose by 0.78 percent to close at $1.29 on Thursday, only to fall to $1.07 after hours. Lockheed Martin revealed the withdrawal of the offer in a filing with the Securities and Exchange Commission. The company did not give a reason for its decision.
Lockheed Martin, which owns 27.7 percent of Terran Orbital, had offered to purchase the remaining shares in the company in March. The offer included:
$1.00 per share for approximately 223 million common stock and dilutive stock-based compensation,
more $70 million in aggregate cash for 103 million outstanding warrants, and
assumption or repayment of $313 million in debt liabilities.
“Terran Orbital Corporation (NYSE: LLAP) ("Terran Orbital" or the "Company"), a global leader in satellite-based solutions primarily serving the aerospace and defense industries, confirms its ongoing strategic review to maximize shareholder value. The review allows us to explore all options,” Terran Orbital said in a statement.
We value Lockheed Martin’s partnership and look forward to continued collaboration under our Strategic Cooperation Agreement which runs through 2035. We remain committed to exceeding customer expectations and delivering cutting-edge satellite solution,” the company added.
Lockheed Martin’s offer was significantly lower than the $12.69 that shares were worth when Terran Orbital began trading on the New York Stock Exchange (NYSE) in March 2022.
Terran Orbital merged with Tailwind Two Acquisition Corp., a special purpose acquisition company (SPAC). A SPAC is an investment company that was already traded on NYSE; Tailwind Two’s sole purpose was to find a company with which to merge and take public under its own name.
Lockheed Martin provided some of the funding for the deal. The aerospace giant uses Terran Orbital as a subcontractor on small satellite orders it receives from the U.S. government.
Terran Orbital has faced struggles with revenue and shareholders unhappy with the decline in the stock price. In October 2023, Terran Orbital received a notice from NYSE of possible delisting after its shares fell below $1.00. Terran Orbital was given 180 days remedy the problem.
Earlier this year, a group of shareholders called for the ouster of CEO Marc Bell and a restructuring of the company’s board of directors. In February, the company and the shareholders announced an agreement to settle the issues.
“Under the terms of the Agreement, the Company’s Board, in consultation with the Investor Group, has agreed to identify and appoint an independent director to fill its vacant seat caused by the passing of Anthony Previte, reflecting the Company’s continual efforts to enhance stockholder value and corporate governance practices,” Terran Orbital said in a press release.
“The Company remains committed to exploring a number of value-creating initiatives as part of its ongoing strategic review process, including those related to the Company’s operations, financial performance (including potential opportunities for cost reduction), and corporate governance, among others,” the announcement added.
Terran Orbital has a contract to build 300 satellites for Rivada Space Networks at a price of $2.4 billion. However, Rivada has been slow in making payments, raising questions about whether the company will be able to raise the necessary funds for Terran Orbital to build the constellation.
The company said it received a milestone payment from Rivada at the end of 2023. Although the company did not specify the amount, it did update its cash on hand from $38.7 million at the end of the third quarter on Sept. 30 to $70 million as of Dec. 31.
Around14 space companies went public via SPACs since Virgin Galactic (NYSE: SPCE) kicked off the trend in 2019. Many of the companies have faced problems with declining stock prices.
Virgin Galactic has seen its stock price fall below $1.00. The company has asked shareholders to approve a reverse stock split at the company’s annual meeting on June 12. Shares will be exchanged for a smaller number of shares that will be more valuable.
Virgin Galactic’s sister company, launch provider Virgin Orbit, also went public via a SPAC. Virgin Orbit declared bankruptcy and ceased operations last year.