Monday, January 07, 2019

Maxar Stock Drops to New Lows After DigitalGlobe Subsidiary Reports Loss of WorldView-4 Satellite

          By Chuck Black

Just about the time when reasonable people thought the news on Westminster CO based Maxar Technologies couldn't get any worse, another Maxar catastrophe bubbles to the surface.

Today's crisis, as outlined in the January 7th, 2019 Maxar press release, "Maxar Technologies Reports Failure of its WorldView-4 Imaging Satellite," is the announcement from Maxar subsidiary DigitalGlobe, that its WorldView-4 Earth imaging satellite has malfunctioned and is no longer operational.

As outlined in the press release, the "WorldView-4 satellite experienced a failure in its control moment gyros ("CMGs"), preventing the satellite from collecting imagery due to the loss of an axis of stability."

Efforts to repair the satellite are ongoing, but so far unsuccessful. According to the press release, "at this time, Maxar believes that WorldView-4 will likely not be recoverable and will no longer produce usable imagery."

WorldView-4, originally known as GeoEye-2, is a sophisticated, third generation commercial imaging/surveillance satellite featuring a large telescope capable of resolving features on the ground just a bit larger than a football.

Maxar advertised the satellite as operating in conjunction with a constellation of other DigitalGlobe owned satellites including the DigitalGlobe WorldView-3, the WorldView-2, the GeoEye-1 and several others.

WorldView-4 sales efforts were primarily targeted at international defense and intelligence customers who were considered to be US allies. Maxar said WorldView-4 generated approximately $85Mln US  ($113Mln CDN) of the company’s 2018 revenue, which is expected to total roughly $2Bln US ($2.67Mln CDN) when the company reports full-year earnings in coming weeks.

The WorldView-4 satellite was insured for $183Mln US ($242Mln CDN) and carried a net-book value of approximately $155Mln US ($206Mln CDN), including related assets.

According to its press release, Maxar intends to write off the net-book value of the satellite in the fourth quarter of 2018 and to "seek full recovery for the loss of WorldView-4 under its insurance policies."

For some, the loss was a catastrophe.

As outlined in the January 7th, 2019 Toronto Star post, "Maxar shares fall to Earth after Canadarm maker loses satellite," a large chunk of Maxar's near-term growth "was dependent on WorldView-4, which will result in a loss of sales and potential earnings growth in 2019 and 2020," according to Toronto ON based Stephen Li, an analyst for St. Petersburg FL based investment firm Raymond James.

The January 7th, 2019 Globe and Mail post, "Shares spiral as Maxar Technologies loses major revenue-producing satellite," quoted Vancouver BC based Canaccord Genuity analyst Doug Taylor, who said he believed WorldView-4, which cost $835Mln US ($1.1Bln CDN) and took several years to build, “is Maxar’s most valuable satellite in orbit. … It represents one of the company’s most significant assets and was the flagship of the DigitalGlobe constellation."

For others, it was simply more of the same.

As outlined in the December 21st, 2018 post, "BREAKING NEWS: RADARSAT-2 Offline for Most of the Week. RADARSAT Constellation February 2019 Launch Date in Doubt," Maxar has already had to deal with the recent, if temporary, failure of its Canadian RADARSAT-2 satellite and with multiple postponements of the launch of the RADARSAT Constellation Mission (RCM).

And while the Canadian government has allowed Maxar real-time access to RADARSAT-2 data for resale, the Feds have also pledged to provide RCM data to the public through their Canadian Open Government initiative, which would certainly cut back on Maxar's ability to generate revenue from the sale of RCM generated Earth imaging data. Expect further details on that initiative to shake out over the next few months.

Maxar stock being traded on the New York Stock Exchange (NYSE) reached a new low of $8.03 US ($10.69 CDN) during the September 7th, 2019 trading session on news of the failed satellite.

Maxar stock on the Toronto Stock Exchange (TSE) also reach a new low during the September 7th, 2019 trading session, bottoming out at $10.62 CDN per share as the exchange closed for the day.

As outlined in the January 1st, 2019 post, "2018: The Year in Space for Canada," Maxar stock on the NYSE was trading at $65.25 US ($88.97 CDN) per share at the beginning of last year, before bottoming out with a December 24th, 2018 low of $9.55 US ($13.02) per share.
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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