Key Points
It has been a tough summer for Blue Origin, Jeff Bezos’s rocket company. Another rocket company, Space Exploration Technologies (NASDAQ: SPCX), has seen its valuation soar above $2 trillion following a successful IPO. Blue Origin, meanwhile, saw its New Glenn rocket — one of its most advanced rocket designs — explode on the launchpad. The rocket alone cost $100 million to $150 million to build, and its complete loss is added to by extensive damage to Blue Origin’s new launch facility, which cost roughly $1 billion to build.
Blue Origin’s New Glenn rocket exploded during a routine engine test. Apparently, the company’s engineers still aren’t sure of the root cause of the accident.
If Blue Origin’s testing had been successful and followed up by successful launch attempts, the company would be looking to raise money at an impressive valuation. The company has not yet filed for an IPO. But experts had been speculating about whether one was on the horizon.
After the explosion, Blue Origin will almost certainly not be going public anytime soon. The rocket company still needs more money, however, to build more rockets and accelerate reconstruction of its launch facilities.
Jeff Bezos has so far been Blue Origin’s sole investor. Now he’s seeking outside investors for the first time in the company’s quarter-century history. Here’s what investors need to know.
Will investors be able to buy into Blue Origin during the next fundraising round?
Bezos may have been hoping a successful New Glenn test launch would enable him to raise new funding. On May 20, Bezos noted that there was finally “enough visibility into our future and our financial success” to raise money from outsiders. “It’s a good time actually to start thinking about the future and bring on some other outside investors.”
Eight days later, the New Glenn rocket detonated during a static fire test.
It’s possible that Bezos will ditch any fundraising efforts until Blue Origin can right the ship and reinstate confidence in its rocket designs and capabilities. But the company is reportedly burning nearly $5 billion per year — a rate that may increase following the New Glenn disaster. Bezos seemingly doesn’t want to be on the hook for 100% of Blue Origin’s cash burn forever.
But here’s the thing: A Blue Origin capital raise will almost certainly be relegated to institutional investors only. It is possible that exposure will become possible through certain funds or investment vehicles down the line, as happened with SpaceX before its IPO. But retail investors shouldn’t expect to get a slice of the pie anytime soon. And I suspect that even if a capital raise moves forward, it may be more limited in scope than Bezos envisions right now. That would give the company time to stabilize and improve its likely deteriorated valuation.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
