Two months before becoming a public company on Wall Street through a merger with a SPAC, Israeli technology company SatixFy (Nasdaq: SATX) had to cut its valuation sharply. From a planned $813 million post-money valuation (reflecting a $632 million valuation for the company’s activity), the actual valuation in the merger was reduced to just $365 million.
At the end of last week, SatixFy completed the merger, and on its first day of trading its market cap shot up to $1.4 billion, as the share price, inexplicably, jumped by 255%. In the merger, SatixFy raised $29 million, and it is due to receive a further amount later on of between $13 million and $100 million.
SatixFy is a developer of satellite communications technology, and produces processors and antennae. It employs some 220 people, half of them in Israel. Last year, the company attempted an IPO on the Tel Aviv Stock Exchange, but gave up on the idea when it failed to receive the valuation it sought.
In March this year, it announced a merger with SPAC Endurance, and, as mentioned, in August it cut its valuation for the purposes of the deal. This followed a substantial lowering of its financial forecasts. Between announcing the merger and completing it, SatixFy appointed a new CEO, David Ripstein, who in the past ran Radcom and GreenRoad. At SatixFy, he replaced founder Yoel Gat, who died aged 69 in April.
On the leap in SatixFy’s share price on its first day of being traded (similar to the rise in the share price of Israeli company Selina Hospitality (Nasdaq: SLNA), which also went public through a SPAC merger last week), Ripstein says, "I don’t manage the share but the company. SatixFy’s potential is huge, and touches almost every one of us."
Talking to "Globes", Ripstein relates how he came to join the company. Gat contacted him after he fell ill and realized that he would have to hand over the reins to another manager. At first, Ripstein admits, he though of refusing "but I did a little research and came to the conclusion that something had happened in the world of satellites in the past two years," he says.
"When I was in telecoms, for 20-30 years I looked at the world of satellites and saw a field that was advancing, but telecoms was always advancing faster. I saw the revolution happen in it. In the past two years, satellites have been running ahead faster than telecoms, and these two worlds are going to meet. Just two months ago, Elon Musk’s SpaceX announced a link-up with T-Mobile and the ability to send text messages (from places with no cellular coverage - S. H.-V.) that circumvent telecoms.
"This strengthens the satellites sector and reminds me how telecoms began with text, thirty years ago. In my view, the pace of development in satellites is higher than in telecoms. Up to now, there has been no mobile coverage at sea or in the air. SatixFy’s technology goes precisely in this direction."
SatixFy was founded in 2012 by the late Yoel Gat, who previously founded and managed Gilat Satellite Networks (Nasdaq: GILT), and Yoav Leibovitch, formerly CFO of Gilat Satellite Networks, and currently chairperson of SatixFy. Gat served as both chairperson and CEO of SatixFy until his death, and he is registered as the inventor of a large proportion of SatixFy’s patents.
"Yoel had the vision to identify the need for technology for communications within satellites," says Ripstein. "SatixFy has a technological infrastructure, not yet complete products, that goes in this direction. The company is developing very special chips, I haven’t seen anything even close to it, that are also very strong. They sit in the satellites and in the ground stations, and facilitate high speeds. They have attracted great interest from most of the leading players - both telecommunications providers and suppliers to telecommunications providers. In our vision, we want to be at the heart of communications, and for our chips to sit at every interface of satellite communications."
Two months ago, SatixFy cut its guidance, and now sees just $10 million revenue in 2022, down from $40 million in its original forecasts, and from revenue of $21.7 million in 2021. EBITDA and free cash flow will be negative.
For 2023, the revenue forecast was reduced from $88 million to $36 million and forecast EBITDA from $23 million to minus $6 million. The company blames supply chain difficulties, a delay in the manufacture of chips by a third party, and a rise in raw materials prices. "As soon as components prices took off, all the suppliers got an appetite, demanded crazy prices, and would not commit to timetables," says Ripstein. "Working with suppliers was extremely problematic. The company couldn’t pay every supplier what he wanted, and even when it paid crazy checks, it was at the end of the queue as a small company. I do feel that the business is stabilizing, there’s more flexibility over price. I see the disturbances lasting months and not years."
On the forecast for the coming years, Ripstein says that SatixFy also took into account the situation of the companies that buy from it and are deferring investments, and also something else - the weakness of the capital market, which affects the ability of those companies to raise money. "So far, I haven’t heard of large postponements," he says, "In the end, it’s something that has to happen: 30 years ago, there were just text messages, and today there’s streaming video and infinite data, consumption speeds are going up all the time. So it’s a question of timing, not of the substance."
Published by Globes, Israel business news - en.globes.co.il - on October 31, 2022.
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