Mynaric Stock: Laser Communication for Satellites
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A small German stock is flying under the radar with a revolutionary technology that enables satellites to communicate using lasers. You can get on the ground floor with this small space company that may be on the cusp of capturing billions of dollars in opportunity. Two high-profile U.S. government contract wins mark a turning point in 2020 for the company which now plans to list shares in the United States.
Nothing in the above paragraph is an exaggeration. It may sound like a compelling story to most, but not for risk-averse tech investors. It’s a small stock that hasn’t realized meaningful revenues yet, and therefore has not yet proven product-market fit, something that’s critically important for “revolutionary” technologies, especially those ones that aren’t addressing large blue ocean total addressable markets (TAMs).
Satellites have been communicating with the earth for decades now. Building a new superior method of communication is great, but it needs to displace methods that are already in use. The company is Mynaric (MOY.DE), and they have their work cut out for them. (All numbers provided in USD unless stated otherwise.)
About Mynaric Stock
Founded in 2009, Germany’s own Mynaric builds wireless laser communication systems needed for aerospace communication networks such as satellite constellations. After raising $15.7 million in funding, the company had an IPO in October of 2017 which raised an additional $32 million according to Crunchbase.
Here’s a fun question for you MBA types. If a company had a $171 million market cap four years ago with a share price of $63 per share, then what should shares be priced at if the market cap were $330 million today? Here’s the math:
- 171 / 63 = 2.7142
- 330 / 2.7142 = $121.58
Shares of Mynaric should trade at around $121.58 today, yet they trade at far less – $79 a share. How can that be? Well, that’s what happens when a company issues shares to fund their operations, something that dilutes existing shareholders who never seem to notice. At the time of their IPO in 2017, Mynaric had 2.7 million shares outstanding, and by the end of 2020, that number sat at 3.39 million. This dilution is not nearly as bad as a company like Quantum Computing Inc., but still something to pay attention to.
While poking around in Mynaric’s 2017 Annual Report, there’s the same sort of optimistic commentary seen today. For example:
We are well on track to complete the qualification unit of our smallsat laser communication product in early 2019, paving the way for serial production thereafter.
Mynaric confirms shipment of two laser terminal flight units, and associated components, to Airborne Wireless Network.
Credit: Mynaric 2017 Report
Airborne Wireless Network turned out to be a total fraud, so Mynaric wasn’t able to play “an instrumental role in helping stitch together the first civil aircraft constellation that will revolutionize the future of in-flight connectivity.” Fast forward to today and they’re now finally moving into production at scale for their satellite laser communication product.
Show Us The Revenues
In the 2020 Annual Report, we’re told that “The Mynaric Group has evolved from a developer into a manufacturer, thus the primary managerial metrics now are new orders and total operating output.” In our world, the primary metric we look at is revenues, because orders don’t mean squat.
For example, just weeks ago Mynaric issued a press release stating, “Mynaric Signs Multi-Million Dollar Deal with Spacelink,” the latter being a subsidiary of an Australian company called EOS (EOS.AX). The press release talks about “a total order volume of up to $28 million depending on exercised options and SpaceLink’s satellite prime selection.” Mynaric expects to ship SpaceLink’s first units during the first quarter of 2023, a date that seems to be so distant based on the client’s need. Mynaric should have no problem supplying units today, given they announced a production facility with a “2,000 units per year production rate target” in June. All this optimism implies that Mynaric is on the cusp of greatness, but proof of traction only comes in one form – meaningful revenues.
For whatever reason, Yahoo Finance isn’t showing the proper basic financial numbers for Mynaric, so here are revenues based on information taken from the company’s annual reports.
We’ve added the green bar which shows what meaningful revenues look like ($10 million), and how far they are from that. Management wants us to focus on other metrics such as “output,” but we only care about revenues because that’s how the bills get paid.
In looking at what revenues we can expect over time, Mynaric talks about a “projected cumulative market volume of USD 3.8 billion for optical communication equipment in the satellite sector by the end of 2029” which isn’t the big blue ocean TAM we were looking for, especially considering plenty of competitors are working on similar laser communication products. For example, SpaceX’s Starlink has successfully tested “space lasers” in orbit for the first time, and Telesat’s constellation Lightspeed will become the first fully-laser communication-linked satellite constellation.
Should I Buy Mynaric Stock?
One reason we wanted to get in front of this stock is because they’re planning an initial public offering (IPO) in the United States, something they talked about this past April. Regardless of where the stock trades, we don’t believe investors should buy this story unless the company manages to achieve meaningful revenues, a number we consider to be at least $10 million in a single year. Even if Mynaric reaches that revenue target, you need to consider the type of business you’re investing in.
The company’s recent sales to the U.S. government hint at a future where several key clients will be responsible for a majority of revenues. (Multiple units of the company’s CONDOR inter-satellite link terminal will be delivered under two contracts with US defense agencies.) Such customer concentration risk is bad, especially when it involves the 500-lb gorilla known as the U.S. government. Then there’s the mention of primary managerial metrics being “new orders and total operating output” which implies a business that sells hardware widgets as opposed to one that captures recurring revenues from hardware sales. Companies that only sell hardware are easily displaced by competition unless they can lock their customers in. It’s not apparent how Mynaric plans to capture recurring revenues.
Conclusion
Mynaric was brought to our attention numerous times by readers who believe the story we told in the first paragraph of this article. Tech stocks are already risky enough. When we come across companies that manufacture leading-edge hardware for space applications, and hope to sell it at scale in the future, we believe traction in the form of revenues is critically important. Bulls will point to a small company that might be acquired by a larger one in the future, and that’s certainly a desirable ending to the story. Regardless of what happy endings one might conjure up, we’ll take another look when revenues hit $10 million per annum.
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Hans Koenigsmann, one of the first employees of SpaceX and who recently retired from the company, has joined the board of satellite laser communications company Mynaric.
Mynaric announced Oct. 6 that Koenigsmann will join the German company’s supervisory board, the equivalent of a board of directors. He will take the place of Gerd Gruppe, a former executive board member of the German space agency DLR, who is stepping down.
Koenigsmann was one of the first employees to join SpaceX in 2002, shortly after its founding by Elon Musk. He held technical oversight roles for much of his career there, including as vice president of build and flight reliability. He stepped down from that post early this year, serving as an adviser for several months before retiring.
Mynaric’s chief executive, Bulent Altan, worked with Koenigsmann in the early years of SpaceX. “We have a relationship going back to 2004, and I’ve been keeping him abreast of what I’m doing in the investment world and at Mynaric,” Altan said in an interview. “I brought up the idea to him about joining Mynaric.”
I see Mynaric is going to be listed on Nasdaq next week. Ticker: MYNA.
Current market cap: 264M.
H1 2021 results in euro: revenue 1.35M, net loss: 16.2M, EPS=-3.93
2017 revenue: 1.68M
2018 revenue: 1.59M
2019 revenue: 0.44M
2020 revenue: 0.68M
So their revenues are very tiny and on top of that 2019 and 2020 revenues dropped dramatically comparing to 2017 and 2018 revenues. Those numbers look quite bad.
A company that says they’re a leader in something disruptive better be showing the revenue growth to prove it. These revenue numbers are just beyond dismal. Nothing to see here.
Company is saying they will have 20m “cash in” this year because they deliver condor terminals for the SDA Tranche 0.
They also got a 36m contract from Northrop for Tranche 1 Transport layer.
Additionally ~9m from Northrop for T1 Tracking layer.
L3 Harris bought a stake in Mynaric and will surely give them the other half of T1 Tracking layer. So another ~9m.
Also part of space Bacn program.
Seems like they will play a role in JADC2 a program which tries to combine the communication between all different fighting domains (sea, land, air, space, subsea)
OneWeb Gen2 order seems very likely. OneWeb contract will be 400m+. However not clear if Tesat (Airbus) lasercom as second player will provide some. If Telesat doesn’t go bankrupt and Rivada space networks will do their constellation contracts will be very likely with those. There is also smaller companies. They will decide after the SDA Tranche 0/darpa Blackjack test results are in.
Also the European secure connectivity Initiative will give 30% to newspace
Companies. Mynaric is part of a study called UN:IO for this exact program. German industry is involved (e.g. Porsche). Politics also want to help with a new space strategy which will be announced in 23.
Another 11.000m² (global HQ) are in the making. 1600m² production capacity for 2000 lasers/year was their “Northstar midterm goal”. You guys are right they surely can’t produce that yet. My personal opinion is that this number is feasible for 2025.
Negative point and my biggest concern is clearly the liquidity. They need new financing in Q1 23. They will have around 20m “Cash in” (basically revenue) in 2022 and 40m losses. Iirc mgmt said in the investor update this number will shrink in the following years.
Thank you very much for the detailed information Dominik! We’ll look to revisit the firm when they clear $10 million USD in revenues for a single year. Space stocks are exceptionally risky as a rule which is why we’re not overly keen on finding more to place bets on. That said, they’re very popular so we’ll stay on top of covering them.
H1 report will be released in a few weeks.
Noted, thank you!