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Griffin on Tech: Taking off for the Nasdaq

Peter Griffin, Editor. 27 August 2021, 1:25 pm

Rocket Lab's debut on the Nasdaq yesterday is a proud moment for the country's tech community and the country alike.

The company's listing as part of a merger with the existing Nasdaq-listed company Vector Acquisition Corp. valued it at US$4.8 billion and generated US$777 million in cash that Rocket Lab can now invest in developing the larger Neutron rocket for more ambitious launches. 

The investor support is a huge endorsement of the work founder Peter Beck and his team, spread between New Zealand and the US, have achieved in recent years. As we heard on RNZ earlier this week, New Zealand has always had a small but important role to play in the space industry.

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Sir Leslie Munro, who served as New Zealand's ambassador to the US in the 1950s, was a leading expert on space law. He was widely consulted when the United Nations tried to tackle the issue of governing human activities in space as the US and Russia attempted to outdo each other in the space race.

One of our leading engineers, Sir William Pickering, headed NASA's Jet Propulsion Laboratory (JPL) for 22 years, during a pivotal time for the space agency during the 1960s and 70s.

When Rocket Lab started sending small satellites into space from its launch pad on the Mahia Peninsula, it became only the second private company after SpaceX to undertake regular small satellite launches, a trail-blazer in a sector that is quickly heating up.

Virgin Orbit, the small satellite launch company founded by Sir Richard Branson is just one of a handful of competitors Rocket Lab now faces. Virgin Orbit will also follow in Rocket Lab's footsteps, going public on the Nasdaq in a similar fashion as part of a public listing that will value it at US$3.7 billion.

Space technology is a risky business. There will be bumps in the road for Rocket Lab and Virgin Orbit that will be reflected in the share price of those companies. But the Nasdaq is the place where high-growth, disruptive companies thrive and Rocket Lab is only our second ever to list there. the first being Sir Neville Jordan's MAS Technology.

From the Hutt to the Nasdaq

MAS started out as a distributor of radar and communications equipment from US company Magnavox. But it soon developed its own research and development capabilities and by the early 1980s was producing earth receivers for satellite TV at its base in Lower Hutt.

It also had significant contracts with military forces around the world. By the 1990s, MAS was predominantly designing and making low frequency, medium to long haul digital microwave links for the telecommunications market. With internet traffic growing exponentially, telcos needed a way to shift data from site to site quickly and efficiently and that's what positioned MAS well to go public in the US.

In May 1997 it raised US$37 million in its Nasdaq listing, with Jordan and existing shareholders retaining just under half of the shares. That made it a relatively small listing at the time, though MAS Technology fit the bill as a high-growth company - its revenue had increased around 30% each year in the previous decade.

With customers all over the world, MAS Technology was positioned well for further international expansion. But its tenure as a New Zealand-run, Nasdaq listed company was to be brief. Before the year was over, California-based Digital Microwave Corporation (DMC), which was also Nasdaq-listed, had made a takeover offer for MAS. 

The much larger wireless equipment maker settled a share swap deal early the following year valuing MAS at around US$110 million. DMC was eventually renamed Stratex Networks, then Harris Stratex and continues to trade on the Nasdaq as Aviat Networks, with a market cap of around $365 million. 

Aviat still has people in New Zealand - in Lower Hutt, where MAS started. Neville Jordan's Nasdaq listing didn't herald an era of Kiwi companies heading to the US exchange - the dotcom collapse put paid to that. But it gave many tech entrepreneurs the confidence that they could go global and rub shoulders with the tech titans, from Aotearoa.

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Rocket Lab held a virtual market opening to celebrate its Nasdaq listing.

Nasdaq is the pinnacle, but other options aplenty

Ahead of this week's listing, Peter Beck, who is well on his way to becoming a billionaire - on paper at least, as a result of the listing, hoped Rocket Lab was a symbol of what New Zealand's tech entrepreneurs could achieve.

"I'd love to see many New Zealand companies follow in our footsteps and end up on the Nasdaq," He told the New Zealand Herald.

Rocket Lab's success boosts the chances of that happening. But at the moment, there's more cash than ever available to promising tech companies, so a Nasdaq listing isn't necessarily the dream scenario for an ambitious founder looking for global exposure and a way to raise additional capital - or a lucrative exit.

This year has seen over $2 billion worth of buy-outs of Kiwi software companies whose founders decided it was better to join forces with other companies that could take their technology and ideas further. Our biggest software success Xero continues to enjoy great success listed on the ASX. 

Founder Rod Drury this week sold down a further A$300 million of his Xero shareholding held by a family trust. Many millionaires are being made in this country as a result of working on innovative technology, dozens of them at Rocket Lab alone, thanks to the company going public. Many of these entrepreneurs and highly-skilled engineers and developers are also using their "exit money" to invest in the next generation of Kiwi start-ups.

Our tech companies are enjoying a wave of success that is ultimately serving to boost our economy. If we can learn anything from Silicon Valley and other tech hotspots, it is that achieving the right mix of innovative technology, talent, and capital is required to breed lots of successful tech companies. Nearly 25 years on from a Kiwi tech company's first foray onto the Nasdaq, we are closer than ever to getting the mix right - and reaping the rewards. 


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