On Sept. 9, satellite data company BlackSky announced the completion of its merger with Osprey Technology Acquisition (SFTW). Shareholders approved the merger on Sept. 8. The combined company has been renamed BlackSky Technology and its shares started trading under the ticker "BKSY" on the NYSE on Sept. 10. As the new entity starts trading, investors want to know if SFTW is a good buy after the merger with BlackSky.
BlackSky was founded in 2014 and it provides real-time geospatial intelligence and global monitoring. It operates its own satellites and works with various businesses and government agencies in the U.S. BlackSky processes millions of data elements daily from its constellation as well as a variety of space, IoT, and terrestrial-based sensors and data feeds.
SFTW and BlackSky deal details
According to the terms of the deal, the combined company received $498 million in gross proceeds, including $318 million in cash held in trust and $180 million from PIPE. The company's pro forma enterprise value is $1.1 billion. While existing BlackSky shareholders will own 63 percent, SPAC investors will own 25 percent, while new PIPE investors will own 12 percent.
Is BlackSky a good investment?
Space revolution stocks are picking up exponentially in 2021 as Elon Musk’s SpaceX, Jeff Bezos’s Blue Origin, and Sir Richard Branson’s Virgin Galactic have upped their space game. While these players enable infrastructure in the space race, BlackSky provides space data and analytics.
In its investor presentation, BlackSky has projected revenues of $46 million for 2021 and $546 million for 2025. The company is looking to double its revenues in 2021 and 2022. Black Sky estimates its total addressable market to be $40 billion by 2025—up from $13 billion in 2020, supported by the growing geospatial imaging and analytics market.
BlackSky's first-mover advantage in the real-time earth observation space could work to its advantage. Another thing that strengthens its competitive advantage is its proprietary data, which is continuously growing.
Interestingly, BlackSky’s relationships with customers like the National Geospatial Intelligence Agency, the U.S. Army, and the U.S. Air Force should continue to bring in revenue visibility for the company. The company estimates a total contract potential of more than $630 million from its customers.
These advantages don’t really matter for investors unless they trickle down to financials. For BlackSky, an investment case can be made based on its future business outlook. It has high revenue visibility with $1.7 billion in pipeline. Moreover, its business is highly scalable and the company boasts of high gross margins of more than 75 percent.
Based on its current stock price, BlackSky’s pro forma EV comes out to be nearly $1.21 billion. Taking the company’s revenue estimates, its EV-to-2022 sales and 2023 sales multiple come out to be 10.6x and 5.4x, respectively. These multiples are lower than BlackSky’s peers in imaging and data services space like Satellogic, Planet Labs, and Spire Global. The rapid revenue growth and its high visibility justify BlackSky's valuation.
The SPAC universe as a whole is going through a negative sentiment, which has depressed their prices. Therefore, the current stock price offers an attractive entry point into BlackSky’s exponential future growth potential.