On September 24, Iridium shareholders approved Rocket Lab’s acquisition of the company, with about 99.6% of votes in favor. The deal values Iridium at roughly $8 billion, including debt. Once it closes, Rocket Lab Corporation (NASDAQ:RKLB) will run one of the largest active satellite networks in orbit. Most investors see the space industry as Space Exploration Technologies Corp. (NASDAQ:SPCX against everyone else, especially as SpaceX pushes Starship toward cheaper, larger launches. I think that view misses how each company actually makes money, and why there’s room for both.
SpaceX Proves the Model Works
SpaceX’s biggest strength is that it owns both the rockets and the network they launch. Starlink ended the second quarter with 12 million subscribers, double the year before, and Connectivity revenue jumped 66% to $4.29 billion. Many of its launches help build a business SpaceX itself profits from. Starship is meant to take that further by carrying bigger satellites at a lower cost. SpaceX’s upside may extend far beyond launch economics. See why Jim Cramer thinks Starlink, Starship, and AI could make SPCX worth substantially more over the long term. Whatever happens in any single test, I expect SpaceX to remain the cheapest way to launch at scale for years. But its focus is increasingly on its own needs. It has already stopped selling new rideshare missions on Falcon 9, which leaves more room for companies serving everyone else.
Hedge funds wasted little time getting involved. Just weeks after its June IPO, 119 hedge funds held SpaceX by the end of Q2, with a combined stake worth $116.5 billion. That’s a strong vote of confidence for a company that had only just started trading.
Why Rocket Lab Still Matters
Rocket Lab competes in a different way. SpaceX builds, launches, and runs satellites mainly for its own Starlink network. Rocket Lab offers that full package to other companies, and with Iridium, it will soon run a major network of its own too. In a recent interview, CEO Peter Beck estimated that Rocket Lab could have built Iridium’s roughly $3 billion constellation for around $350 million, and that too, years faster. He called it a rough calculation, but even if it’s only close, that’s a huge advantage. Lower costs let customers, and Rocket Lab itself, try new ideas in orbit without risking billions. The launch side has a solid track record too. Rocket Lab recently marked 10 years of its New Zealand launch site, with almost 100 launches from there. The part I’d be cautious about is that Neutron, its larger rocket, still hasn’t flown. Its Iridium deal was also partly funded by a $1.944 billion share sale.
Hedge fund interest grew as well, with the number of funds holding the stock rising from 43 in Q1 to 52 in Q2. Their total stake fell from $932 million to $736 million, though, which likely reflects the stock’s slide in June rather than funds heading for the exit. More funds joining during a drop suggests some saw it as a buying opportunity.
Overall, there’s no debate that SpaceX wins on scale and launch costs. But in my view, Rocket Lab wins on the cost of building and deploying a full satellite system for everyone else. Both can grow without needing the other to fail. But the bigger question is how much of the potential Rocket Lab already prices in. The company is a beneficiary of SpaceX’s possible retirement of Falcon 9, so if RKLB takes the void left by that, it is worth paying a decent multiple for. Whether a Price to Sales ratio of 43.5 or a 2029 PE ratio of 108x is justified is a question worth asking. I believe SpaceX will dominate space, and Rocket Lab will be a necessary second company, winning government contracts on the basis of government diversification alone. Not that it needs those favors; the firm is doing well on its own, but since it’s not profitable, the question of overpaying today is hard to answer. Also, the high expected revenue growth justifies a high valuation, but interestingly there are 7 companies that offer an even higher revenue growth, with two of them offering more than twice the growth!
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