Google Backings a Space Venture, Yet I'd Deliberately Steer Clear of Investment Opportunities in It.
This is a story that could have been straight out of a Hallmark movie, and it arrived just in time for Christmas.
Last week, space news site Payload Space shared the heartwarming tale of a small Ukrainian company, "Promin," and its ambitious quest to build a new rocket by combining the expertise of some of the best Soviet-era rocket scientists with American corporate know-how.
Located in Dnipro, not far from the front lines in war-torn southeastern Ukraine, Promin was working towards its first rocket launch when Russia invaded in 2022. With those plans put on hold, the company decided to establish itself in the United States instead, and finally opened its doors in Brunswick, Maine in December.
There, the Maine Space Corporation helped Promin find U.S. partners, including tech giant Alphabet, and establish a development and testing site at a former Naval Air Station. According to Payload, Promin plans to manage projects and conduct research and development in Dnipro, while a team of U.S. engineers builds the company's first "Promin 1" rocket and conducts tests in Maine.
However, there is one potential issue: I believe this project may be doomed from the start.
Light that candle
While I don't see any technical issues causing Promin to fail, the company's plan is a bit unconventional. Promin plans to build a solid fuel rocket where both the fuel and tank are made of the same combustible material. This should result in a lighter-than-usual rocket, enabling the company to launch picosat and nanosat payloads of 3 kilograms into Low Earth Orbit for as little as $100,000 per launch.
But dedicated space fans will spot the first problem right away: Even within the smallsat launch market, there is a clear trend of "small" satellites getting larger. Companies like Rocket Lab and Firefly Aerospace are building more efficient launchers with more boost to orbit. Promin's decision to go ultra-small with its own payloads appears to go against the grain of where the space launch market is moving.
And that's not even Promin's biggest problem.
Uncle Sam wants you...to stay out of his business
The biggest challenge I fear Promin will face as it tries to establish a business in the United States is the U.S. government's hostility towards foreign rocket firms trying to conduct U.S. space work.
As space journalist Ashlee Vance described in "When the Heavens Went on Sale," the U.S. government was skeptical of both Rocket Lab's and Firefly's initial attempts to integrate foreign technology with U.S. rocket launches. Against all logic, the U.S. government worried that these companies' foreign backers wanted to steal U.S. rocket technology to sell it to terrorists.
Rocket Lab eventually won over its U.S. customers by signing contracts with NASA and the U.S. military, establishing multiple research, production, and launch locations across the U.S., and demonstrating strict adherence to U.S. export control regulations. However, Firefly failed to allay U.S. concerns.
The U.S. government repeatedly passed over Firefly for NASA and military launch contracts. Firefly was lagging behind established U.S. space firms like SpaceX and United Launch Alliance, and it was losing out to "mom-and-pop" start-ups that received tens of millions of dollars in government support.
Furthermore, during visits to Vandenberg Air Force Base in late 2020, Firefly's Ukrainian financier Max Polyakov was assigned "escort only" status - only allowed on base with an Air Force minder. The government then informed Firefly that unless its Ukrainian backer gave up his board seat and sold his controlling interest in Firefly to a "more acceptable" investor, the FAA would not grant Firefly a license to launch its Alpha rocket.
(By this point, Polyakov had invested $200 million in funding Firefly's development.)
Ultimately, Firefly had to bow to the government's demands. First, Polyakov sold his majority stake in the company to win a launch license in 2021. (The rocket launched, but did not reach orbit.) Then, Firefly was informed that it would not receive any further launch licenses, and would lose access to Vandenberg until its Ukrainian connection was completely severed. Polyakov sold his entire stake in the company and left Firefly completely in 2022.
The lesson for investors
Today, Firefly is doing just fine - now under new management, it's gearing up for its sixth rocket launch and preparing to send a spacecraft to the moon. But that's small consolation to the Ukrainian investor who got the company off the ground in the first place. I'm worried that investors in Ukrainian Promin will eventually face the same challenges that convinced Polyakov to divest his holdings in Firefly.
Should this company undertake an IPO, or even simply attempt to attract private market investment from small investors who think "if Google invests in it, it must be safe," think again. I wouldn't see it as a safe investment at all.
Despite Promin's innovative design and potential cost savings, the company may face challenges in attracting investment due to the U.S. government's historical skepticism towards foreign rocket firms. Investors should be cautious, considering the experience of Firefly, which had to divest its Ukrainian connections to secure launch licenses in the United States.
Investing in Promin may not be as financially secure as some might think, given the potential regulatory challenges the company could face due to its foreign origins.
