Astra Space could face a class-action lawsuit for misleading investors

The Rosen Law Firm has opened an investigation into Astra Space, Inc. [NASDAQ: ASTR] due to allegations that Astra presented misleading material to the public. Astra’s stock price plummeted following the report by market analyst Kerrisdale Capital, a short seller of Astra Space.

Astra Space went public on the NASDAQ on June 30, 2021, and finished its day at $12.90 a share. Valued at $2 billion, Astra Space is working on its launch vehicle to carry payloads up to 500kg to orbit. Following its first successful launch to orbit, the company announced its first launch from Florida. Astra also has plans to build its own satellite constellation in the future. In the meantime, Kerrisdale Capital has published a report entitled “Astra Space Inc (ASTR): Headed For Dis-Astra,” which looks into Astra’s claims and market predictions. From Kerrisdale Capital’s standpoint, Astra faces massive obstacles to becoming a viable business and has nonsense launch projections.

Kerrsidale Capital’s Report

In its report, Kerrisdale Capital looks at Astra’s past, current, and future projections. We’re going to take a look at some executive summaries and break down what we can. It should be noted that I am not a Financial Advisor, and this is not financial advice. We recommend reading this report should you be interested in the full context.

Astra is falling behind its competitors. Multiple industry executives we interviewed, who routinely secure launch services for small satellite manufacturers on a global basis, agree that Astra’s rocket dimensions and payload capacity are well below the “sweet spot” of customer needs. Rocket Lab, Relativity, ABL, and Firefly all have plausible plans to produce 1,000kg+ rockets that will be entering the market in the near term; by contrast, Astra aspires to produce a 500kg rocket two years from now. Astra’s attempt to catch up is self-evident. Shortly after its SPAC announcement, Astra publicly disclosed (without any credible technological explanation) an increase in the targeted capacity of its rockets; shortly thereafter, and surely to Astra’s embarrassment, the public learned that Astra had entered into an agreement allowing it limited access to study one of its competitor’s rocket engine IP in exchange for $30m.

The agreement referred in the report is a deal Astra made with Firefly Aerospace. First reported by The Verge, this deal involves Firefly Aerospace giving Astra access to its IP for the Reaver rocket engine. The deal also involved Firefly sending Astra engines to inspect. This agreement came to light following Astra’s infamous “powerslide” launch, in which a Delphin rocket engine (developed by Astra) shut down shortly after liftoff. This launch was aborted early into flight.

Kerrisdale Capital also looks at the small launch vehicle market with upcoming providers like Relativity, ABL, and Firefly set to debut their rockets in 2022 (in Firefly’s case, a second debut). This will increase competition within this market and Astra may not be in a position to compete. But the reason for this is may not be expected.

Expect many more failures as Astra ramps up its launch efforts. Astra is playing a risky game. It needs to ramp production and prove reliability of a cheaply built rocket while maintaining access to public markets to fund cash burn. We believe Astra’s reliability goal for its rockets is 80% (which itself is not exactly confidence inspiring). According to a well-informed source, however, at its current stage of development, the rate of Astra’s rockets failing may be as high as 1 in 2. Should Astra encounter even one high-profile failure, considerable damage to Astra’s reputation and development plans seems inevitable.

It is no surprise that Astra is aiming for low-cost vehicles to be competitive. However, these lower costs may mean cutting corners. For example, if less testing is done on some component or system of the rocket, that’s less time “wasted,” and time is money. Astra’s upcoming NASA launch, expected NET January 2022, will be a big test. The company has made orbit once, but can lightning strike twice for the smallsat launcher?

The report essentially boils down to this: Astra has big dreams, but they are likely to remain dreams. And soon, the company will have just been a dream too.

Rosen Law Firm opens investigation

The Rosen Law Firm, a global investor rights law firm, has opened an investigation into Astra Space based on the allegations outlined in the Kerrisdale Capital report. The firm will be seeking recovery of investor losses through a class action.

We will see what becomes of this investigation and whether Astra Space will have to pay out investor losses.

Featured Image Credit: Astra Space

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