Thread by @skorusARK

1/ We finally know what @chamath is doing with his SPAC. He’s teaming up with @richardbranson and taking a 49% stake in Virgin Galactic with an additional $100M of his own money. The new space race is now at full throttle.

Thread ⬇️

2/ The Space Industry is changing. It used to be government driven and monopolistic, which led to rising costs, but now ~15% of investment is commercial and costs are falling.

3/ The vision for Virgin Galactic is space tourism in the near term and point-to-point hypersonic travel in the future. Something Musk and SpaceX have plans for as well.

4/ The company is valued at ~$1.5 billion and they have spent ~$1.5 billion on R&D over 15 years. So it’s basically an acquisition of derisked R&D efforts.

5/ Galactic is positioning itself as a head to head competitor with Blue Origin, highlighting that it thinks it can be first to market in Q1 2020. Blue Origin thinks it may fly people by the end of 2019.

6/ The addressable market is high net worth individuals. Love that Branson has the private island rental as a comp. He has good insight there with Necker Island.

7/ Also 800 people climb Everest each year at ~$65,000. So if there’s a line for this, maybe a fun spaceflight won’t have a demand problem.

8/ What does $250k buy you? – a Michael Bay esque experience! It’s not just selling a 90 min flight, it’s selling a 4 day experience and entrance into the “Space Club”

9/ Reservations alone should lead to ~$130 million in revenue.

10/ $250,000 is a lot to most, but there’s a sizable market for those where it’s less than 1% of net worth.

11/ If that holds true, cost declines meaningfully expand the market. At $100,000 a ticket the addressable market is ~1.8M people, at $50,000 the addressable market grows to 5M people.

12/ How do they expect to lower costs? Manufacturing efficiencies, less refurbishment, longer vehicle lifespans.

13/ Perhaps the most important piece is that the ultimate goal is point-to-point travel. Imagine going from LA to Tokyo in 2 hours and theoretically landing at a normal airport. That's a much bigger opportunity than tourism!

14/ Like many space companies, Galactic found a way to leverage the government. It’s crazy that New Mexico built this ~$220M spaceport and it’s only costing $5 million a year to rent.

15/ Now to the projected financials. They expect to fly 66 people in the first year. Only 571 people have ever been to space & they plan to do 10% of that in year one and dwarf it by year two.

16/ And a look at the unit economics. Costs are ~$420,000. At $250,000 a ticket and 5 passengers, revenue is ~$1.3M. Not too shabby, but can see why costs need to come down to get to a $50,000 ticket.

17/ They expect to be EBITDA positive 2 years after commercial launch, which is probably better than ~80% of today’s SaaS IPOs.

18/ Projecting a 73% gross margin. This is why Chamath thinks it looks like a SaaS company under the hood. Though no recurring revenue 🤷‍♂️.

19/ At a valuation of $1.5 billion it is 2.5X 2023 expected revenues.

20/ @chamath would love to have you on @ARKInvest podcast to discuss.

21/ Link to full presentation: sec.gov/Archives/edgar…