Right now, just looking at the publicly avalable info without digging to hard, you’d have a better shot with a $5 investment in a State Lotto rather then in K/R.

I was under the impression that only the subsidiary “The Spaceship Company” was being “sold out” to Northrop Grumman, NOT Scaled Composites in its entirety. I have only read the standard news stories and not the trades, so, perhaps I am wrong.

In any case, at the time of this comment, I have just learned of the accident in Mojave and all of this is rather moot for now as I pray for those lost, those injured and their families.

Not to be tacky or cliche, but nothing else seems more appropriate for all of us …

Ad astra per aspera.

Godspeed Todd, Glen and Eric.

Healing prayers and wishes to everyone in the Scaled family.

http://www.scaled.com/

PS I am currently unable to publish this comment under my google blogger account(?)

My name is Bill Harrison

I can be reached at blharrison1@yahoo.com

Great blog, Ken.

I personally think that NG purchased SC LLC to get technology and skillsets. My WAG is that NG wants to use the suborbital tech to emplace drones surreptitiously, allowing deployment from the US with minimal detection before arrival. Or in reality-land they likely want to apply SC LLC’s niche to their drones.

The Bloomberg at work was pretty quiet about the whole thing today, but the BBN story didn’t come out until after 3pm CST. We’ll see what tomorrow holds.

I’m actually happier that SC LLC got bought up by a traditional corp rather than by a private equity firm. Their whole function seems to be to extract value from the corporations for themselves rather than grow the firms organically.

Here’s how it works:
The financial details were not released, so it’s not clear the extent to which NG borrowed money to do the transaction. Assuming they used all stock,
NG can either issue new shares of stock (pisses of existing shareholders), or use shares that they have repurchased in the open market, or treasury stock. NG will offer SC LLC a certain number of shares whose market capitalization (# shares x market price) is ‘equal’ in value to the 60% equity share of SC LLC that NG does not already own (actually it will be a contrived price based on a variety of market parameters). The existing owners divvy up that block of NG stock proportionately, and are then free to sell or hold shares however they see fit. Since this is in publicly traded shares, the “liquidity event” arises when shares are sold and Mr. Rutan gets a big check deposited in his bank account. NG may have also paid in some combination of cash and stock, or SC LLC might have acquired some NG intellectual property. Since it is a contract, there can be all sorts of goodies embedded in there.

The question of the JV with VG is an interesting one. The folks at SCLLC may have been permitted to keep their equity in VGJV. I honestly can’t see a military contractor like NG wanting to get mixed up in a potential ITAR morass with that one. If NG did have to acquire it I think it’s likely to be spun off in some way.

The “Netscape moment” will be when a private equity firm buys out a NewSpacer for some serious dough. The obvious target there would be SpaceX.

I’m kind of in agreement that NG/SC is likely to stagnate at the SS2 level. If the concept proves out I can see the Kingfisher guy in India picking up one or two for his lifestyle corporation. Some of the big package shippers might pick up a couple for high-margin same-day package deliveries. This will effectively make it the DC-3 of the suborbital industry, and a fair seller until supplanted by a superior model.

I am kind of ambivalent about the overall impact in attracting investment capital to the nascent industry. I think investors would like to see a few more successes before really getting interested. X Prize Cup should help, and EVERYONE needs to be exhibiting there, raptors to rodents. Even though Boeing wouldn’t have a direct return to shareholders from such an exhibit, it is nevertheless a very wise investment in future corporate opportunities to do so. The sooner they can get SS2 test flying, the better.

Ray

I agree that SS2 is a done deal, barring total catastrophe. However, it’s important to realize that the Spaceship Company is a joint venture between Scaled and Virgin–i.e., the latter is a partner rather than a customer, meaning that development expenditures will not likely be borne entirely by VG.

So imagine that VG and TSC are both quite profitable, the space tourism business is exploding, and SS2s have become an industry standard. Who decides where the profit from Scaled’s share of TSC is directed? Will that be whoever is running Scaled, or will it ultimately be Northrop Grumman headquarters? If the latter, then there might be a problem–given good enough performance, shareholders will expect higher dividends. Also, customers will want more resources devoted to advancing the SS2 line, on which their businesses depend. If there’s no simple straight-line from SS2 to an orbital vehicle, there’s not going to be a business case from the viewpoint of the shareholders, the NG directors, and possibly whoever ends up replacing Rutan if/when he retires.

Think about commercial aircraft for a moment. They’ve been manufactured for nearly a century, have been a massively profitable industry for most of that time, and yet despite drowning in money and customers they’ve been remarkably static: Commercial aircraft fly at the same altitudes, and virtually the same speeds as they did 40 years ago. And that isn’t because the businesses lack talent or vision, but simply because the risk of taking revolutionary leaps is too high. The more profitable Scaled becomes, the less likely Northrop will be to allow them to pursue quantum leaps without complete external funding.

BTW, I went ahead and joined the Yahoo group yesterday. Sorry I wasn’t able to see your recent SRWN until just now, as I’ve been caught up with various things and only posting here and there on the fly. I’ll be starting my next TIAW soon, and probably I’ll post my intended topics in the group.