Lockheed Martin ups stake in Terran Orbital, invests $100 million to expand smallsat manufacturing

WASHINGTON — Lockheed Martin is upping its stake in small satellite manufacturer Terran Orbital with a $100 million investment that increases its total equity from 9.4% to 33.5%. 

Terran Orbital announced the new investment Oct. 31. Lockheed Martin has invested in the company since 2017 and selected it to produce 42 satellites for the U.S. Space Force’s Space Development Agency under a $700 million contract. 

Headquartered in Boca Raton, Florida, Terran Orbital plans to spend the new funding to expand satellite manufacturing facilities in Irvine, California, and is canceling plans to build a large factory on Florida’s Space Coast in partnership with Space Florida.

“This makes sense for us right now because there is an immediate demand for satellites,” Terran Orbital’s co-founder and CEO Marc Bell told SpaceNews. Building an assembly line in Florida was projected to take three years while the expansion in Irvine will only take 12 months, he said. “For me to add on to that is far easier than trying to expand on another coast.”

Terran Orbital also is pivoting away from plans to build a constellation of 96 synthetic aperture radar satellites, called PredaSAR. The company will continue to produce SAR satellites but will sell them to customers, avoiding the risk and expense of building its own constellation. “We want to focus on manufacturing and not on being a satellite operator,” Bell said. 

He said the shift was precipitated by Russia’s invasion of Ukraine and the sudden growth in demand for SAR satellites. “So we thought the best move for us in the long term was to sell the satellites” either to government or commercial operators, Bell said.

Since the start of the conflict, a number of companies and government organizations have inquired about buying satellites, said Bell. So it became clear that selling hardware — including buses, payloads and components — was the way to go, he added. “A SAR constellation is very capital intensive, as any constellation is. So this de-risks the company going forward from a capital perspective.”

Executives concluded that PredaSAR was dragging down the market value of Terran Orbital after learning about the recent acquisition of its competitor York Space by a private equity firm and that York’s market value was $1.12 billion, or more than three times the valuation of Terran Orbital. 

“We are much larger than York, and we’re trading at a fraction of what York’s valuation was,” said Bell. “So there’s a big disconnect between us and them, and we think the constellation was a drag on our valuation.”

The Irvine plant has capacity to produce 250 satellites per year, which is higher than York’s, he said. 

Bell said the revised strategy should boost Terran Orbital’s share price, which was over $11 when the company started trading on the New York Stock Exchange after going public in a SPAC merger — and is currently trading at less than $3, in part due to the broader market downturn in SPAC stocks. 

“The market wants us to do something different,” said Bell. “So we’re gonna focus on our core business, which is manufacturing, which is not capital intensive, and very low risk.”

Austin Moeller, aerospace and defense analyst at the Canaccord Genuity investment bank, wrote in a research note Oct. 31 that Terran Orbital’s value will rise as a result of Lockheed’s investment. “It is apparent that Lockheed is looking to do more than just dip its toe into the water in the smallsat manufacturing realm, given the significant TAM [total addressable market] opportunity for smallsats relative to exquisite, GEO satellites.”

According to Moeller, “considering that York has constructed just 13 satellites in the past decade (as opposed to 70+ for Terran), we continue to see a disconnect between the current valuation of LLAP [Terran Orbital] (~$350M market cap) and peers like York that sold for 3.2x this valuation to private equity.”