Seraphim Space Investment Trust Plc (SSIT) has issued an ITF (intention to float) announcing its intention to launch an initial public offering for a listing on the premium segment of the main market of the London Stock Exchange. The newly established investment trust, which will invest in a diversified international portfolio of early and growth stage Space Tech businesses, expects to publish a prospectus in the coming weeks. SSIT will be the world’s first listed Space Tech fund. It will be targeting a somewhat meteoric (pun intended) annualised NAV total return of at least 20% over the long term.
Who is the manager?
SSIT’s investment manager is Seraphim Space (Manager) LLP. Seraphim describes itself as the world’s No. 1 Space Tech investor. It says that it has unparalleled early access to companies that will shape a new economic revolution. The Manager has been a leading global investor in the space sector since 2016 and has a proven track record investing in Space Tech with Seraphim Space LP (the “Seraphim Space Fund”), the world’s first venture capital fund to be focussed on new space technologies that is currently demonstrating an IRR of 31 per cent.
The seed portfolio
The Company will acquire a portfolio of 19 seed assets from the Seraphim Space Fund including, stakes in several unicorns such as:
- Arqit, a British-based quantum encryption company;
- Spire Global, a leading provider of satellite based global weather forecasting, maritime and aviation predictive analytics; and
- AST & Science, the first and only space-based cellular broadband network aiming to provide global 4G connectivity accessible to standard smartphones.
These assets will be purchased for cash and the existing investors in the Seraphim Space Fund will use that cash to subscribe for ordinary shares in the Company (“Ordinary Shares”) at 100 pence per Ordinary Share.
In addition to the issue of Ordinary Shares in connection with the acquisition of the seed assets, the Company is intending to raise new capital through the issue of Ordinary Shares to institutional investors and eligible UK retail investors by way of a Placing, an Offer for Subscription, Direct Subscriptions and an Intermediaries Retail Offer (the “Initial Issue”) at 100 pence per Ordinary Share.
The announcement lists the following items of key information
- Seraphim Space Investment Trust PLC is a newly established closed-ended investment company managed by Seraphim Space (Manager) LLP as its alternative investment fund manager. The Initial Issue is being made in order to raise funds for the Company to invest in order to gain exposure to an international portfolio of investments in Space Tech businesses, including through the acquisition of the seed assets.
- The Company’s investment objective is to generate capital growth over the long term through investment in a diversified international portfolio of Space Tech businesses. “Space Tech businesses” means businesses which rely on space-based connectivity or precision, navigation and timing signals or whose technology or services are already addressing, originally derived from, or of potential benefit to the space sector.
- The Company will have in place binding agreements to purchase the seed assets from the Seraphim Space Fund.
- The Company will, pursuant to a sale and purchase agreement and conditional on a successful IPO, acquire 15 assets (the “Initial Portfolio”) from the Seraphim Space Fund. The Company will, by virtue of the acquisition of the Initial Portfolio, have a portfolio which had an aggregate valuation of £26.1 million as at 31 May 2021.
- Following the sale of the Initial Portfolio, the Seraphim Space Fund will still hold investments in four Space Tech businesses, being ArQit, Iceye, D-Orbit and Spire (the “Retained Assets”). These companies are currently subject to corporate activity which may have a material impact on the value of these investments. Pending the completion of the relevant corporate activity or on confirmation that the corporate activity is no longer expected to conclude in the near term, the Company will acquire all or a proportion of the Retained Assets from the Seraphim Space Fund in one or more transactions on or before 31 December 2021. Assuming the successful completion of these transactions currently underway, Seraphim estimates approximately £70 million of value relating to the Retained Assets could be acquired by the Company, bringing the total potential value of the seed assets to be acquired to approximately £96 million.
The announcement lists the following investment highlights:
- Seraphim is the world’s #1 Space Tech investor: Since launching the world’s first ‘New Space’ technology venture fund in 2016 (the Seraphim Space Fund), Seraphim has established itself as the ‘go to’ VC for Space Tech entrepreneurs. Across Seraphim’s space investment initiatives, the firm has developed a portfolio of over 50 international space-related companies – becoming the most prolific specialist Space Tech investment group globally.
- Space sector undergoing transformational growth: The economics of space have changed with the costs of building and launching a satellite having fallen by a factor of more than 100x since 2010. This paradigm shift is leading to the space sector being central to some of the megatrends that will reshape our world, helping to address some of the world’s most pressing problems and in the process helping to unlock US$ trillions of value.
- Deal flow: Seraphim already routinely receives a significant proportion of the global deal flow in the space sector. This provides the Manager with a high degree of information asymmetry over each sub-category within the domain. Seraphim enjoys a global profile as a leading investor in the sector, which is being continually developed by publishing proprietary research, regular commentary in global press and publications and consistently speaking as a keynote or on panels at industry events around the world. Seraphim has a proven history of originating off-market investment opportunities.
- Proprietary feeder activities: The Seraphim Space Camp Accelerator (“Seraphim Space Camp”) an entity associated to the Manager, delivers access to a broad array of Space Tech businesses which could in time become investment candidates for the Company, and provides the Manager with a two-year limited option to invest in each company participating in its accelerator programme. Seraphim Space Camp also operates the Amazon Web Services Space Accelerator on behalf of Amazon.
- Track record: Seraphim has demonstrated its ability to invest early into some of the most notable emerging Space Tech companies, three of which have announced their plans to go public via SPAC-merger transactions, and with the Seraphim Space Fund currently demonstrating an IRR of 31 per cent.
- Seeded portfolio: The seed assets comprise a diverse group of 19 international companies including a range of businesses now considered to be category leaders. Seraphim has a deep understanding of these businesses and has conviction to deploy significant additional capital to support proven teams to address their global vision.
The manager says that it believes that Space Tech is highly attractive to investors for the following reasons:
- Impact: Space has a unique role in helping to address the world’s most pressing problems. Space will be an enabler for connectivity and autonomous mobility whilst addressing the crisis faced in climate, sustainability and population growth.
- Long-term growth: Space is at the nexus of a number of long-term megatrends including autonomous transport, smart cities, climate sustainability, Internet of Things, 3D printing and Artificial Intelligence.
- The economics of space have changed: Technological advances are overturning traditional models for operating in space, as low-cost access to space becomes a reality with innovations such as reusable rockets. The cost of building and launching a satellite has fallen by a factor of more than 100x since 2010.
- Timing is now: Today there are approximately 4,000 satellites in orbit – over the next decade over 100,000 satellites are planned. This will create a new digital infrastructure in space that will deliver capabilities that will define societal change over the forthcoming decade.
- First mover advantage: The space industry has steep learning curves and being first to market could confer an advantage by providing a ‘head start’. Being first to develop, patent-protect and commercialise new technologies can enable first movers to achieve scale the quickest thereby creating significant competitive moats.
Why invest now?
According to the ITF:
- Space is a US$366 billion industry. The Space Tech market is now at a key inflection point. Since Sputnik first reached orbit in 1957 to mark the dawn of the Space Age, a total of approximately 11,000 satellites have been launched of which more than 2,000 have been launched in the last handful of years by just four privately financed Space Tech companies – SpaceX, OneWeb, Planet Labs and Spire. These four companies by themselves plan to launch around a further 50,000 satellites and have collectively raised multiple US$ billions in venture capital funding to enable them to do this.
- Factoring in the more than 200 other companies – that include the likes of Amazon – also seeking to develop their own constellations of miniaturised satellites, means that, to date, plans to launch in excess of 100,000 satellites have been announced. It is likely that in the next few years more new satellites will be launched than in the entire history of the Space Age combined.
- The sector is now at a critical inflection point. With record levels of investment, it is likely that in the next few years the category leaders in each part of the Space Tech market will become established, enabling them to potentially dominate some very large market opportunities for years to come.
Comments from Will Whitehorn, Chair Designate of Seraphim Space Investment Trust plc
“There is nothing short of an industrial revolution underway in the space sector. We see it every day; the exponential growth in the number of satellite launches and in the number of activities capable of being undertaken in space. Many of these activities are going to be crucial to managing our burgeoning population growth and achieving net zero emissions. These are very exciting times for the sector, with the UK further strengthening its position as a global leader in the fast-growing Space Tech market.
Space Tech is forecast to be a multi-decade, trillion-dollar investment market that has not previously been available through listed opportunities. We are excited to offer investors access to a diversified portfolio of some of the sector’s highest growth-potential companies.
Mark and his team of trailblazers at Seraphim have unrivalled expertise and an excellent track record of selecting investments with the potential to become the ‘unicorns’ of tomorrow. They have already broken boundaries by launching the world’s first fund for private investors focused on the emerging ‘New Space’ market. They are now doing the same for public market investors with the launch of the world’s first listed space investment trust.”
Comments from Mark Boggett, CEO of Seraphim
“Satellites are already the bedrock of the global economy, powering everything from the location-based smartphone apps like Google Maps and Uber that we all rely upon, through to telecoms and transportation networks, agriculture, finance and even internet itself.
The importance of the space sector to all our futures has never been greater. Satellites have a critical role to play in addressing some of the biggest challenges of our times. The data captured by satellites can help us monitor and mitigate the effects of climate change and drive a more sustainable future. Likewise, it is the connectivity delivered from space that will enable the three billion people still without internet access to get online.
With the paradigm shift in the economics of space meaning it can now cost as little as $100,000 to build and launch a shoe-box sized satellite, the space sector is undergoing rapid growth. As new constellations of thousands of satellites start to come online, a new digital infrastructure
in the sky is being developed, a platform from space to catalyse some of the mega trends that will change our world, in the process creating many billion dollar companies. Our mission is to engage at an early stage with the sector’s most fearless entrepreneurs and support them in their quest to push back the boundaries of what is possible, helping transform our world for the better whilst capitalising on a trillion-dollar investment opportunity.”
Want to hear more?
The ITF says that Mark Boggett, CEO of Seraphim, will be hosting a webinar for institutional and retail investors in which he will discuss the space sector. The timing of these will be announced in due course.
[QD comment: This fundraise could take the investment trust world to dizzying new heights!!! We have always made the case that the closed end fund structure is the best for the less liquid and more unusual assets in this world. It seems that this now also applies to those that are more out of this world.]