Astra is running out of cash and is almost out of options

Last week Astra Space, a space launch and engine company, defaulted on its debt leading to the need to take on a short term funding round in hope it can find more before running out of cash. The company has been struggling for the past year to keep its stock price above the $1.00 mark and get its Rocket 4 developed.

Astra is in serious need of some cash

At the end of October, Astra defaulted on a $12.5 million loan because the company’s cash reserves dropped below the minimal requirement. This triggered the company to pay a $2.1 million payment and have its interest increase from 9% to 15%.

This loan required the company to keep at least $15 million in cash and cash equivalents on hand but it failed to do so on October 11. Then the company agreed to waive the default if Astra could keep at least $10.5 million in cash and cash equivalents. However, Astra was unable to maintain that amount as well.

$8 million remained on the loan after October with the company obviously getting close to not even having that much left in the bank.

On Monday, Astra announced that it secured interim financing through JMCM Holdings LLC and Sherpa Venture Funds II, LLP. The firms purchased the outstanding loan and provided a bridge loan of $3.05 million that is due November 17. JMCM and Sherpa waived the default terms on both loans in order to give Astra time to formalize further funding.

The firms also purchased warrants on Astra stock, or the right to purchase actual Astra stock at a certain price, usually lower than what the stock is trading at on public markets.

If this scenario seems familiar, it’s because Virgin Orbit went through something like this at the end of 2022 through early 2023 – receiving loans from Virgin Group as an interim as it sought formal funding. Virgin Orbit later went on to file for bankruptcy when funding options dried up.

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What options does Astra have left?

Since August of 2023, Astra has attempted to find a funding source and announced in October that JMCM planned to be the lead investor. However, it looks like other investors are getting hard to find.

In 2021 a large group of companies went public through SPACs or Special Purpose Acquisition Companies. Since then, almost all of them have seen a down turn in their share prices. Astra has also had a hard time with failing to make Rocket 3 a success and then pivoting to develop Rocket 4. All of this while inflation and interest rates soaring.

Right now Astra seems confident they can still find investors to fund them into next year so that Rocket 4 can start flying. However, the market overall doesn’t seem to support that move.

Rumors about Astra selling part of its satellite engine division came up earlier this year. That has been so far the most successful part of Astra and the company knows it. The company has moved employees around to prioritize the production of its engines, which has slowed development of Rocket 4. However, Astra’s engines are actually bringing in revenue, not a lot, but more than nothing.

My Guess: We could see a reorganization of Astra to focus on these engines and drop rocket development all together. That might be a tough ask since becoming a launch provider was the company’s focus since the start.