Skip to main content

Northrop Grumman Corp(NOC-N)

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

Firefly Aerospace Is Reborn, and Getting Bigger

Motley Fool - Sat Jun 17, 7:08AM CDT

Raise your hand if you remember Firefly Space Systems, the start-up space company that went bankrupt and had its assets sold at auction in 2017.

Now raise your hand if you've heard about Firefly Aerospace, which bought the assets of Firefly Space Systems in its bankruptcy and was recently valued at more than $1 billion. The new Firefly has conducted two launches of its Alpha space rocket (the second made it to orbit, despite being deemed a partial failure). A third launch may happen as early as later this month, demonstrating Alpha's ability to deliver one-ton payloads to low Earth orbit for the U.S. Space Force on short notice. (The precise date of launch will depend on when Space Force asks for it.)

But that's only the beginning of the story.

Launching rocket emerges from the clouds.

Image source: Getty Images.

Partnership with Northrop Grumman

Arguably Firefly's biggest success to date wasn't actually a rocket launch at all, but rather the coup of forging an alliance with aerospace and defense giant Northrop Grumman(NYSE: NOC). Recognizing that Northrop had an urgent need to upgrade the engines on its Antares rocket first stage to eliminate its dependence on foreign suppliers, in August 2022 Firefly negotiated a partnership with Northrop.

Going forward, Firefly and Northrop will jointly develop two rockets: First the upgraded Antares already mentioned, to be dubbed the Antares 330 and outfitted with Firefly-designed "Miranda" engines to replace the Russian RD-181 engines used on earlier Antares rockets. At the same time, the companies are collaborating on an entirely new rocket, tentatively titled just the "Medium Launch Vehicle," or MLV.

In what CEO Bill Weber calls a "true partnership," Firefly will build the engines and rocket structures, while Northrop will specialize in rocket avionics, and the two companies will decide who takes the lead on making sales depending on the customers being targeted (with Northrop focusing on government sales and Firefly on commercial sales).

Several irons in several fires

Firefly is moving quickly to get these projects off the ground (literally). Sitting down to chat with Weber earlier this week, I learned that after this month's Alpha launch, Firefly plans to shift quickly into full-rate production of the rocket, aiming to achieve a launch cadence of roughly one rocket per every two months by the end of this year.

The redesigned and upgraded Antares 330 rocket will follow shortly thereafter, probably in the second half of 2024, followed a year later by the introduction of the MLV. And Firefly also plans to begin putting "Blue Ghost" lunar landers on the moon, beginning in July 2024.

And even then, Firefly will only be getting started.

Buying Spaceflight

So Firefly aims to provide end-to-end space services, launching payloads atop rockets, servicing some payloads in orbit, and landing others on the moon. And just last week Firefly announced a new acquisition that should speed it toward these goals. On June 8, Firefly announced it will acquire rocket rideshare aggregator Spaceflight Inc. from its current owners, Japan's Mitsui & Co. and Yamasa Co., in an all-stock transaction that will be "cash neutral" for Firefly.

Weber explained that buying Spaceflight solves three problems for Firefly. First, in contrast to the relatively new Firefly, Spaceflight has been in business since 1999 (according to data from S&P Global Market Intelligence). In buying Spaceflight and absorbing Spaceflight's staff, Firefly inherits its nearly quarter-century of experience managing space missions and makes it Firefly's own. Second, Firefly inherits Spaceflight's experience working with space customers on some 450 missions over the years -- and marketing launch services to these kinds of customers. This should help ensure that when Firefly launches an Alpha rocket (or helps launch an Antares 330, or an MLV), it does so with a full payload, with satellites from as many customers as needed o entirely "max out" the rocket's launch capabilities and waste no space.

And third, and perhaps most interestingly, Firefly gets Sherpa.

I'll bite. What's a "Sherpa"?

For want of a better word, "Sherpa" is Spaceflight's version of a space tug -- a small, unmanned spaceship that can perform in-orbit missions for other space customers, including towing satellites to their proper orbits (so the satellites don't need to be weighed down with engines of their own), repositioning satellites from one orbit to another, and eventually assisting companies in de-orbiting obsolete satellites -- helping to solve the problem of space junk in Low Earth Orbit.

This is a market that Firefly was already hoping to enter by developing its own space tugs, dubbed "Space Utility Vehicles," or SUVs. In acquiring Spaceflight, however, Firefly gets this product in its entirety, saving years of development work and without any cash cost to the company. In so doing, Firefly will be able to leapfrog rival space company Rocket Lab(NASDAQ: RKLB), which has developed "Photon" spacecraft for this purpose. From now on, Firefly will be able to operate alongside Northrop Grumman and its own MEV and MRV space tugs -- providing space tug services to smaller satellites while Northrop services the larger satellites.

What it means to investors

Clearly, Firefly has ambitious plans, but will investors ever get a chance to participate in -- and profit from -- them?

This remains to be seen. Rightly cautious in a market environment that has seen some space stocks go broke, while others had their valuations crushed, Weber isn't making any promises on the subject of conducting a Firefly IPO, for example, or on whether he has further acquisitions (or sales) planned. Tantalizingly, though, he does suggest that within the next 12 or 18 months, there's the potential for something big to happen.

We'll be watching. For a company that picked up assets in a bankruptcy auction and has built up a business with a $1 billion private market capitalization in just a few years, it may be worth the wait.

10 stocks we like better than Northrop Grumman
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Northrop Grumman wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 12, 2023

Rich Smith has positions in Rocket Lab Usa. The Motley Fool recommends Rocket Lab Usa. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.