NewSat itself directly employs 75 people. But the hundreds of temporary jobs it would create in the United States and France got it $400 million in funding. NewSat then put $50 million of its own money in, used debt instruments for another $50 million, and raised equity worth $100 million.
When it came to private investors, the bulk of interest came from the US and UK.
“Initially, we were laughed out of everyone’s offices in Australia,” Ballintine says. “We were a little company raising $600 million in a financial community that had no way of understanding anything about satellite technology. Australian analysts understand resources, and digging holes. It was just the wrong place to start. So we started in markets that understood space and satellites.
“Funding the first satellite is murder. The due diligence we had to go through was an enormous task.” But since they started, NewSat’s market cap has risen from $60 million to $300 million. As the company gets bigger, raising the funds for satellites will get easier.
But one huge risk remains: that of the satellite crashing to the ground.
It’s not unheard of. A Russian company has had seven failed launches in just over a year; a July launch destroyed navigational satellite equipment worth $200 million.
That’s why NewSat is going with Arianespace to build its launcher. The French company hasn’t had a failure in 57 launches.
NewSat’s satellite is big. By global standards it’s huge. Ballantine says realistically, Arianespace was the only company who had a launcher big enough to carry it.
The technical aspects of the satellite and launcher are wholly built to minimise risk. The satellite design aims to change as little as possible from previous successful launches, so as not to introduce any new design flaws. Satellites stay up for at least 15 years, so the engineers are highly conservative, using only materials that have been tried and tested as opposed to the newest innovations. As one of NewSat’s engineers said to SmartCompany: “If a bolt hasn’t flown before, we don’t want it.”
If all else fails, NewSat pays $36 million in insurance premiums every year. It also owns the orbital slot next door, so it could migrate most of the bandwidth it’s already sold to Jabiru 2, which it hopes to launch a few months after the first satellite.
But launch failure would be a huge setback. “Even though we have insurance, and even though there hasn’t been an Arianespace failure in 57 launches, an explosion is always a risk,” Ballintine says.
If it works though, the possibilities are extraordinary. NewSat could come from virtually nowhere to being one of Australia’s largest companies.
The sums speak for themselves.
Ballintine says satellite companies typically trade at multiples of between eight to 12 times EBITDA.
The EBITDA on NewSat’s first satellite is close to $200 million. If NewSat launches five, that’s a billion in EBITDA right there, which you’d then multiply by at least eight to get a multibillion dollar market capitalisation.
“It’s not just a wild stab,” Ballintine says. “If we get our act right, and we launch multiple satellites … there’s no question this could be a very large company indeed.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
