Why Rocket Lab Stock Went to the Moon Today
Key Points
Rocket Lab will buy Iridium Communications in an $8 billion deal.
Rocket Lab will pay $54 per share for Iridium stock.
Rocket Lab will compete more directly with SpaceX in the future.
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Rocket star Rocket Lab (NASDAQ: RKLB) is making headlines again this morning, after completing yet another satellite launch for Synspective over the weekend. (They also delayed a launch for iQPS, citing unfavorable wind conditions.)
This morning, though, the news doesn't concern stage separations -- but corporate mergers, and it's sending Rocket Lab stock flying 9.6% through 10 a.m. ET.
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Nov. 25, 2024, close-up view of engines firing at an Electron rocket launch from LC-1 in New Zealand. Image source: Rocket Lab.
Rocket Lab buys Iridium Communications
Rocket Lab announced this morning that it will acquire Iridium Communications (NASDAQ: IRDM) in a deal valued at $8 billion. Iridium, one of the original "satellite phone" companies, now focusing on Internet of Things (IoT), aviation, maritime, and Position, Navigation, and Timing (PNT) services, will trade all its outstanding stock to Rocket Lab for $54 a stub, paid $27 in cash and the rest in stock.
The companies call this "one of the most transformative deals in the space industry," marrying Rocket Lab's rocket fleet to Iridium's satellite constellation -- and thus giving Rocket Lab a captive customer similar to SpaceX's (NASDAQ: SPCX) Starlink at the same time as it gives Iridium an in-house launch capability -- also similar to Starlink!
What's next for Rocket Lab stock
Not long ago, I had a conversation with Rocket Lab CEO Peter Beck. We discussed the commoditization of space launch, the higher profit margins available from providing in-space services like SpaceX Starlink -- and I asked what kind of business Beck might choose to become "Rocket Lab's Starlink?"
At the time, Beck was still mulling the idea. Now it seems he's made his decision, and it's to buy Iridium and take on SpaceX's Starlink business -- at least tangentially in the IoT realm -- and potentially attack it where it's a bit weaker in aviation, maritime, and especially PNT.
It's an exciting time to be a space investor.
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Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.
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