More about Virgin Galactic-Aabar deal

This article provides more info about the announcement today that the Aabar Investment Fund in Abu Dhabi is putting big money into Virgin Galactic and other space ventures : Arab investment boosts spaceship venture - msnbc.com.

Don't know if this is an "Netscape moment", as Michael Mealling discusses in the above article, but the magnitude of the investment is certainly a major milestone for the NewSpace industry. Everyone in the industry will be watching to see if this investment raises the credibility of NewSpace in general and attracts money to NewSpace firms.

I'll note that this involves the largest investment in a NewSpace venture by an independent actor, where by "independent" I mean it does not involve an angel investor or a government program. Aabar evaluated suborbital space tourism and other suborbital vehicle apps, e.g. carrying a small orbital launcher, and found these markets to be the viability. They could be wrong, of course. Investment firms make wrong bets all the time. But this shows that serious investors can look at these markets and find them worthy of serious money.

With hundreds of people putting significant money down for suborbital tourism (despite no vehicle yet flying) and moguls lining up to pay $20M-$30M to go to the ISS, the reality of space tourism is way past the theoretical market study stage. The question is how big the space tourism market will be, not whether it will exist. Aabar is betting that it will be quite sizable.

Update: Branson is considering whether to float shares of Virgin Galactic on the public market: Virgin Galactic Aiming For IPO: New investment from Abu Dhabi could be just the beginning for Richard Branson's space tourism company - Forbes.

Posted 07/28/09 | 16:19:34 by TopSpacer | Filed under: NewSpace

Comments

Doesn't it strike you as strange Richard Branson is looking for cash for VG at this point, both in this deal and in an IPO?

Why Richard Branson would want to dilute his investment if the future is so promising? It should be worth much more in a couple years after revenue flights have started.

Does VG need the capital? It sounds like they had not run through the $275 million already committed by Branson. And Branson has deep pockets to continue if needed.

If they do need it then it looks like the cost to launch this venture will be much higher then expected.

Or it could be that Richard Branson is looking for money for moving forward with an orbital tourist system.

Or is the money just going to Richard Branson for the one-third of his interest. If so then he has basically recovered what he put into VG and everything earned is beyond the payback point - which is nice for a high risk venture in the uncertain economic times.

In any case I suspect there is a back story here that could be very interesting.

Posted by Spacer at 07/28/09 18:02:07

"I mean it does not involve an angel investor or a government program."
The fund is largely owned by the Abu Dhabi government and as mentioned in the article its goals are developing the local tourism industry and to acquire technical know-how. So i would say this is definitely a goverment program.

Posted by Atlas at 07/28/09 18:49:17

"So i would say this is definitely a government program."

While the seed capital for Aabar may be from the sovereign wealth of the Emirate, it would be quite a stretch to call Aabar a government program.

Aabar Investments is a public joint stock company listed on the Abu Dhabi Securities Exchange.

Aabar invested in Tesla Motors this month as well.

Posted by John Kavanagh at 07/28/09 20:26:15

I suspect Branson just found it far more convenient to use Aabar's money then his. if he's put 140 Million in and managed to raise the value of the company to 900 million, he limits his further investment needs,
so if he has losses elsewhere (Recession), he
is not being faced by demands from Virgin.

at a minimum, on paper his investment is worth 6X what he put into it.

Not bad really if the firm doubles in value again,
he still does well, if the firm tanks he limits his loss and if the firm just tags along, he's got no bleed.

Posted by anon at 07/28/09 20:45:02

Anon,

I agree. It also means that lack a capital should not be a barrier to the success of VG as with so many space start-ups.

So if it fails now it will either be for technical or market based reasons. Neither looks to be a show stopper at present.

So I would say the biggest hurdles now are the regulators approving the deal, and then down the road, ITAR, for operating the system in the Gulf region.

Posted by Spacer at 07/28/09 21:08:55

Something is wrong over at Forbes, one cannot say "Branson's record with publicly traded companies has been mixed" when a company sells stock at 15 and buys it back at 5.12 (if they want it). Not unless one is hopelessly lost in an "investor/buyer only" point of view.

Just what does Forbes think companies want out of selling stock? Who does Forbes think gets the initial 15 per share? Almost 10 dollars for free beats most things (alternatives that usually involves some kind of interest payment) and if you run a company well enough there's nothing stopping you from doing it again.

Separately getting 280 million for 32% of a company that has at most spent 270 million (but likely quite a bit less) and thus gets a value of 875 million as well as likely getting another 100 million for additional R&D and the promise of an additional spaceport __can not__ be said to be a dilution of the original investment unless the terms of the contract are outright insane.

Posted by Habitat Hermit at 07/29/09 05:07:50

I should add "...or unless one is the kind of person who finds 20% annual profit a reasonable achievement for a(ny) business, just like too many MBA-zombies do these days and have for the last decades.".

Posted by Habitat Hermit at 07/29/09 05:18:19

Add Comment

Note: HTML code will not work except for bare URLs (i.e. http://www...). Also, for postings older than 1 week, comments are filtered manually to prevent spam and so may not appear for a few days.
Note: Trash talking and name calling, especially in anonymous comments, won't be tolerated.