Sunday, July 05, 2015

The REAL Story Behind the Upcoming (Maybe) exactEarth IPO

          By Chuck Black

The recent announcement that Cambridge, Ontario based COM DEV International was spinning off its exactEarth Ltd. subsidiary into a separate, publicly traded company highlights both the growing international market for satellite data and the fact that Canadian space industry entrepreneurs continue to depend on ongoing partnerships with both government and large private players.

An exactEarth video released in November 2011 as a preliminary sales aid in order to assist with the release of two years worth of legacy ship tracking data collected using the firm's satellite based AIS technology in January 2012. As outlined in the January 29th, 2012 post, "Aggregation, Contextualization, Telsat, MDA, exactEarth and Stephen Harper," the data released could be accessed using a selection of search criteria, including date and time range, geographical area, AIS message type, ship type and country flag. Graphic c/o exactEarth.

As outlined in the June 30th, 2015 Communitech News article, "As interest soars for satellite data, exactEarth explores IPO," the real origin of exactEarth goes back to the late 1990's at the Kitchener, Ontario based Communitech Hub, an industry-led innovation centre that then supported hundreds of tech companies through a variety of government and private programs.

One of those programs was something called the DATA.BASE initiative. As outlined in the March 14th, 2014 Communitech News article, "Open call for DATA.BASE project submissions until March 31," the program, funded by Communitech, the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) and a variety of other organizations, worked to develop "leading-edge initiatives related to the data services market in southern Ontario."

Certainly they seem to have succeeded in at least this one instance. According to Glenn Smith, a former DATA.BASE program director: 
When we think about the DATA.BASE, some of the things we were starting to impact were the development of new products, new processes, new intellectual property. And certainly exactEarth was able to come to market with new products from those engagements.
Although government funding via DATA.BASE allowed exactEarth to develop the intellectual property related to satellite based automatic identification system (AIS) it was developing, the company wasn't poised for growth until it formally incorporated in 2009 and began working out an equity program to attract at least one outside partner.

ExactEarth CEO Peter Mabson (left) with Industry Minister Christian Paradis and Minister of State for Science & Technology Gary Goodyear in September 2012. As outlined in the July 2012 SatMagazine executive spotlight post on exactEarth Ltd., Mabson held various executive positions within COM DEV related to the creation and development of new business opportunities before joining exactEarth in 2009.  Photo c/o National Research Council.

That new investor was the Madrid-based satellite operator, Hisdesat Servicios Estratégicos (Hisdesat).

As outlined in the September 30th, 2010 article, "exactEarth Closes $55M Equity Financing," the final agreement included approximately $15Mln CDN in investment funds from both COM DEV and Hisdesat, plus an additional $24Mln CDN "debt conversion" to COM DEV, for a total of $55Mln CDN.

This new funding allowed exactEarth to commercialize its technology and build out its network.

By late 2011, the company was feeling confident enough in its product to release a set of the data collected over the previous two years. As outlined in the January 20th, 2012 Digital Ship article, "Global AIS archive launched," the data-set included "over 250 million maritime vessel locations dating back to July 2010."

The released data essentially served as a "sales aid" to convince potential clients of the validity and usefulness of the product. With just the odd, minor set-back or two (one of which was described in the June 5th, 2012 post "State Politics Delays exactEarth Baikonur Launch") the company has moved forward ever since.

The first suggestion that exactEarth might be considering an initial public offering (IPO) was the March 9th, 2015 COM DEV press release titled "COM DEV provides strategic update on exactEarth," which stated that "exactEarth has retained Canaccord Genuity to advise its Board of Directors on implementation of private and public funding options as well as potential merger and acquisition opportunities."

Canaccord Genuity Group is the largest independent investment dealer in Canada. The company has been involved with deals for Amaya Gaming Group in its $4.9Bln USD (6.18Bln CDN) acquisition of PokerStarsYamana Gold's $3.9Bln USD (4.92Bln CDN) joint acquisition (along with Agnico Eagle) of Osisko Mining and dozens of other deals over the last decade in the aerospace & defense, agriculture, cleantech, private equity and other industry verticals.

But of course, the real key to COM DEV's long-term growth strategy for exactEarth appears to be the developing partnership with Melburne, Florida based Harris Corporation.

Canaccord Genuity Group chairman David Kassie and SickKids Foundation VP Seanna Dempsey joined TSX Company Services VP Loui Anastasopoulos and others to open the TSX Venture Exchange on September 12, 2014. Photo c/o TMX Group.

As outlined in the June 8th, 2015 exactEarth press release, "exactEarth and Harris Corporation Form Strategic Alliance to Provide Real-Time Global Maritime Tracking and Information Solutions," the two firms had formed an alliance to produce real time AIS data service using the Iridium NEXT constellation via the implementation of 58 hosted payloads covering the maritime VHF frequency band.

Satellites cost money. Given all the new fiscal requirements related to the Harris partnership, things had reached the point of no return.

Shortly after the Harris partnership was announced, and as outlined in the June 23rd, 2015 Waterloo Record article, "Com Dev subsidiary ExactEarth going public," the company formally filed a preliminary prospectus for an IPO.

What happens now?

Certainly someone is going to make bucketfuls of money on this deal. IPO's tend to do that. Whether or not exactEarth and COMDEV employees make out like bandits, only time will tell.

Chuck Black.
But it's certainly an excellent case study of what Canadian space entrepreneurs need to do in order to get funded.

Editors note: Of course, sometimes nothing happens. As outlined in the July 31st, 2015 Record article, "ExactEarth postpones IPO," the Cambridge-based company, has now decided to postpone its IPO "due to current challenging conditions in the capital markets."

Chuck Black is the editor of the Commercial Space blog.

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