Problems at Redwire (RDW)
Problems at Redwire (RDW)
Problems at Redwire (RDW)
Redwire (NYSE: RDW — $484 million) is a Jacksonville, Florida-based roll-up of seven space equipment manufacturers. Redwire went public through a SPAC merger at a $620 million valuation, but its seven underlying companies were acquired for approximately $150 million between February 2020 and June 2021. The premium appears to be a symptom of aggressive SPAC projections and spurious metrics. For example, the company’s claimed $280 million backlog is largely “cancellable by customers for convenience” and Redwire’s projection of 11x revenue growth over the next five years seems at odds with its inability to file its first 10-Q. In addition, a celebrity duo promoting an alleged partnership with Amazon appear less than credible.
AE Industrial Partners, a private equity firm, formed Redwire in 2020 to roll up a collection of seven aerospace companies. Redwire currently manufacturers antennas, sensors, solar arrays, cameras, composite booms and other items for customers including the Air Force Research Laboratory, Boeing, Lockheed Martin, Loral, and NASA.
Redwire’s public filings disclose the purchase price and timing of its acquisitions. It acquired Adcole Space for $32.6 million in March 2020, In Space Group for $45.4 million in June 2020, Deep Space Systems for $4.9 million in June 2020, Roccor for $17.9 million in October 2020, LoadPath for $8.4 million in December 2020, Deployable Space Systems for $24.8 million in February 2021, and Oakman Aerospace for $15.2 million in June 2021. In sum, Redwire acquired its operating companies for $149 million between February 2020 and June 2021. Add on a net cash balance of approximately $50 million ($170 million in SPAC proceeds less $120 million in debt) and Redwire’s core assets should be worth around $200 million; the market currently values Redwire around $500 million. Why?