Sidus Space Stock: A Tiny Geospatial Intelligence Stock
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Just like market reports, reliable business statistics are hard to come by. Somewhere between 0.00006% and 2.5% of companies reach the billion-dollar milestone. There’s an order of magnitude or two between those two numbers, but the message is clear nonetheless: The odds of becoming a billion-dollar success are pretty darn high. Of course, there are plenty of successful companies of all shapes and sizes that never get close to that sort of valuation, but generally, they’re not ones that the average retail investor would bet on. Better to take the 80-1 odds on Rich Strike winning the Kentucky Derby, if you just want to place a modest bet. But investors love what they love, and that includes a scrappy little space stock called Sidus Space (SIDU).
About Sidus Space Stock
Sidus Space is a 10-year-old spin-off from Craig Technologies, a private aerospace company founded way back in 1999 by Carol Craig. It’s worth mentioning that Craig was one of the first women eligible to fly combat aircraft in the U.S. Navy, not to mention the first active-duty female aviator in her squadron to serve as a P-3C Orion naval flight officer. She’s also an engineer who had a hand in designing and developing military aircraft cockpit systems. And she’s very much the face of Sidus Space, a company that she bankrolled until last year, raising $18 million total between a $3 million venture round in September and then a $15 million IPO in mid-December. (To put that number in perspective, median IPO size in 2021 was about $177 million.)
We’re quite impressed that this Cape Canaveral, Florida-based company opted to go the traditional route to the public markets rather than merging with a special purpose acquisition company (SPAC). As we recounted in our recent piece on Astra Space Stock (ASTR), 10 out of 12 public companies took the blank check to the bank in 2021 (though many settled for much less than the promised amount due to the high rate of redemptions by institutional investors). Craig said in an interview with SpaceNews that she briefly considered the idea but:
“I talked with a couple of SPACs and people about that. Number one, the more I read on it, it just didn’t seem like something I wanted to be a part of. I wouldn’t say that it’s not legitimate, but somebody described it as going in the backdoor — or going in through the side window, as opposed to going in the front door. I like transparency. I like the idea of doing this upfront, the way most people expect it to be done.”Carol Craig, CEO/founder of Sidus Space
Respect. As retail investors, we highly value transparency, so let’s take a deeper dive into what Sidus Space does.
What Does Sidus Space Do?
The better question to ask is what will Sidus Space do in the future. Currently, the NewSpace company manufactures hardware for rockets and satellites, as well as autonomous underwater vehicles. They’ve been doing that for a while now leaving us to wonder why they haven’t been able to grow revenues. Customers include the usual U.S. government agencies (ie, NASA and the Department of Defense) and the usual defense contractors (ie, Lockheed Martin and Bechtel). One high-profile project involves a satellite deployment platform on the International Space Station (ISS) called SSIKLOPS (never mind the real name). Sidus actually sounds like one of the half-dozen private space firms acquired by Redwire Space (RDW) over the last couple of years to build a publicly traded space infrastructure company sans any sign of meaningful revenues.
But Sidus Space has bigger ambitions. The company is planning to add a major data services component as a provider of geospatial intelligence -120 satellites by 2026. Delivering business or strategic intelligence using satellites, as well as other types of space- and terrestrial-based sensors, is quickly becoming crowded with competitors. There are already a number of publicly traded geospatial intelligence companies, and we’ve already invested in the biggest one on and off the planet.
Sidus Space is taking the bullish perspective on the emerging satellite-powered geospatial intelligence market by building and operating its own constellation of up to 120 satellites. These partially 3D-printed LizzieSat satellites can carry customer sensors and other technologies for a fee, while also collecting data for insights on aviation, maritime, weather, space services, earth intelligence and observation, financial technology, and the Internet of Things.
Should You Buy Sidus Space Stock?
While the company certainly knows something about building stuff for space, operating a fleet of satellites and monetizing the data is another thing entirely. The first LizzieSat is actually scheduled to be launched from the ISS later this year, which puts Sidus Space way behind similar competitors like BlackSky (BKSY) and its dozen orbiting satellites or Spire (SPIR) and its extensive suite of space-based data and analytics solutions. Another smallsat manufacturer, Terran Orbital (LLAP), is also pivoting into the geospatial intelligence business.
Sidus Space is by far the smallest of these companies, with a market cap of just $25 million. This isn’t a small cap, it’s a nano cap, a company that falls under a $50 million market capitalization. Per Investopedia, nano caps are also very risky because “they are such small companies and are particularly prone to manipulation.” Meme stocks are just another name for companies being manipulated by a flock of cheerleaders whose motivations always remain unknown.
We don’t invest in companies with a market cap of less than $1 billion, and Sidus Space is no exception. Here’s how they stack up to some other space names out there in regards to size.
The company’s market cap – $25 million – happens to be about as much money as they made in the 10 years of business through 2021. The company’s most recent quarter offered some hope for the future, with revenue increasing from about $153,000 to nearly $1.8 million. It’s about time, because the trend hasn’t been their friend according to their disclosed financials.
Can anyone guess what the decrease in 2021 was caused by? That’s right Little Johnny, The Rona. So hopefully that’s past them now. This begs the question of why this 10-year-old company hasn’t been able to grow revenues until now? “Ms. Craig’s accomplishments as a seasoned CEO include the following awards,” says the company. We’d take $10 million in meaningful revenues over awards any day.
None of that revenue, of course, is related to the future smallsat constellation. (Sidus thankfully spares us the SPAC-esque slideshow full of unrealistic revenue projections.) Instead, the money is from payouts on other contracts it has won recently, including one with NASA worth more than $5 million. Sidus Space had about $10.5 million left in the coffers at the end of Q1-2022, so based on net losses of about $2.3 million last quarter, the company presumably has enough money to keep the lights on through the end of the year. Beyond that? Who knows, but dilution and/or debt could be part of the equation. Either way, it’s way too small potatoes for us to fry.
At some point, all investors need to draw a line and refuse to invest in companies that fall below a certain market cap threshold. As mentioned earlier, very small stocks gravitate towards manipulation for reasons that can’t be controlled. If nobody knows about your sacred cow, you may become tempted to pay for research. If your float is small, your stock price can easily be manipulated. Below, you can see some recent tweets on Sidus Space that are a bit suspicious. A paid research firm is talking about a coming conference with Sidus, and that tweet is sandwiched between two bots touting a discord trading service that will help you trade your way to a better zip code by speculating on shares of SIDU.
More reasons why we would never touch a company this small, no matter how great their story is.
There are a lot of cool companies doing cool things, but that doesn’t mean you have to invest in them. Sidus Space is a miniscule company with a leader who has received a great deal of accolades, but one who hasn’t been able to grow revenues until now. As they’re entering uncharted territory, they’ll be encountering much larger competitors with more dough and domain knowledge when it comes to geospatial intelligence. Remember: no one can hear you scream in space. Whatever that means, we’ll be passing on Sidus Space stock and wishing the company best of luck.