Since satellite communications systems company SatixFy Communications (NYSE: SATX) began to be traded in New York a year ago, through a merger with a SPAC (special purpose acquisition company), it has lost about 86% of its value, changed CEOs twice, and struggled to present results that might excite investors. But now, it could be that the change is happening: a deal reported by the company sent its share price up 30% at the end of last week, to give it a still modest market cap of $50 million.
SatixFy develops processors and technologies for satellite communications. CEO Nir Barkan, who returned to the company after several years and was appointed to the post in June, says that the satellite industry is at the height of a revolution, and that SatixFy "wants to be a partner in every possible constellation: satellites, ground stations, terminals - we have solutions for it all."
The deal reported last week is with Canadian company MDA, a provider of technological solutions to the space industry. MDA is buying a British subsidiary of SatixFy, SatixFy Space Systems UK Ltd., a developer of digital satellite payloads systems and subsystems, including digital beam forming antennas and on-board processing, for $40 million, and is paying Satixfy a further $20 million for chipsets for those systems.
Barkan says that the background to the deal began in 2016, when major satellites company Telesat decided to switch from high-altitude satellites (38,000 kilometers above the Earth) to LEO (low Earth orbit) satellites that orbit the Earth much more rapidly.
"That’s a revolution, and companies like Elon Musk’s Starlink and Amazon are also coming into this field," Barkan says. With this technology, it is possible to obtain high-speed Internet even in remote places. "Your telephone will switch from a cellular network to a satellite network without you being aware of it, and there will always be reception, whether on a plane, or on a ship, or on the Annapurna Ridge in Nepal," is how Barkan describes it.
Telesat "got stuck" because of a lack of finance, and, according to Barkan, changed its concept with the aid of SatixFy to one in which "you don’t need all the bandwidth and the whole satellite network; you can start with fewer satellites and proceed from there. We lent a hand to a deal being closed between Telesat and MDA: we are supplying the chipsets that are the brains of the satellites, and also the modules on the satellites. As soon as we enabled prices to come down, the constellation became possible."
The project was agreed a month ago, and the next stage is that MDA will produce the digital payload, and so it bought SatixFy’s subsidiary. The advantage, says Barkan, is that SatixFy will no longer compete with the companies to which it sells chipsets, giants like Lockheed and Airbus, which should make them more willing to buy from it. Barkan says that the satellites industry is not greatly affected by the macro environment, because it’s an industry of long-term investment and projects that take years.
"Analysts and financial institutions don’t look at us"
You sold a subsidiary for $40 million, and your market cap is $50 million. How do you explain the discrepancy?
"The company merged with SPAC, and since then there has been instability in the CEO position and no very large deals that could be reported to the market, so we have never been in touch with the market, and analysts and financial institutions didn’t look at us. That is the reason that the share price dwindled. Also the float isn’t large. I don’t think that at $50 million anyone could buy all 100% of the shares. Now there is also a stream of deals on the horizon, which I hope will be successful, and we’ll benefit from more ‘noise’ in the media and vis-à-vis the market."
Barkan is SatixFy’s third CEO within a year, and his title is still "acting CEO", while the CFO is "interim". He believes, however, that the appointments will be made permanent. "The company had to make decisions from one minute to the next. I don’t see further changes in the management in the next few years. Incidentally, the stability at the company has been amazing," Barkan says. "Until Yoel died (co-founder and CEO Yoel Gat, S. H.-V.) there had been one CEO, and many managers and staff have been with us for over five years now, which is unusually stable for today’s industry."
Barkan says that SatixFy’s goal is to generate significantly higher revenue from a range of sources (satellites, ground stations, and so on) and customers. "We won’t be a one-customer company - we’ll be spread over many projects," he says, adding that the moves currently getting underway will lead to actual revenue in 2026. "Today, we’re in the right place with the right technology. We are also very much an R&D-oriented company. Unlike other companies that spend 8-10% on R&D, with us nearly all the money goes on that, and we’ll continue that way. We are also hiring more people. The goal is to fulfill all the promises, and to benefit from the fruits of the investment."
Barkan points out that SatixFy too is active in the hot field of recent months, AI. "We have hired an AI manager, and we intend to make us of the AI revolution within eh satellites revolution; we have some very interesting directions. Perhaps we’ll find ourselves number one in this area, with very interesting solutions."
"Everything is moving towards LEO satellites"
On the satellite industry in general, Barkan says, "It barely moved for decades, but in the past five years the market has undergone a complete change. New players are coming in, because the technology has become accessible, and they realize that if you gain a lot of users, the cost of building the network is negligible. Everything is moving towards LEO satellites."
He says that this was the vision of Yoel Gat, SatixFy’s founder and its CEO until he died last year. "The vision is being realized, and SatixFy is built for it. We were pioneers in the market, and today all the dreams and ideas that it takes years to develop are reaching maturity. We have found ourselves almost the only supplier in the world, although of course there will be competition later."
If big players are coming into the market, and you are almost the sole provider of this technology, why wouldn’t they try to acquire you?
"An acquisition could certainly happen, but in my view not at these values. The sale of the subsidiary to MDA stemmed from the fact that MDA needed a quantum leap in digital payload. If other players want to lay their hands on other technologies of ours, an offer might come along. At any rate, our goal is to grow the company; we’re not looking to be sold."
Published by Globes, Israel business news - en.globes.co.il - on September 5, 2023.
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