Intuitive Machines (NASDAQ: LUNR) stock is up 29% post market on the announcement of a NASA contract award. The tentpole value of that contract is $719 million but that doesn't all flow to LUNR. Far from it - it's a joint venture which receives the contract. It's also over multiple years. On the other hand it's a cost plus contract which should mean that the risk associated with it is minimal. We can, after all, still expect the US govt to pay its bills.
The immediate cashflow effect is not, therefore, going to be that large. But that's fine, Intuitive is still well capitalised as a result of that Spac combination and IPO back in mid-Feb. That. of course, led to some silliness with the stock price which soared to $80 and above at one point. To crash back to Earth again near immediately as well. While we do expect that sort of performance as people test their rockets for the first time perhaps not in something more mature like LUNR.
Intuitive Machines stock price from NASDAQ
As should be obvious the announcement came after hours and so therefore the price movement did. We might well expect more movement premarket this morning as well.
The truly important part of this though is not really the value of this contract, nor the size or timing of it. Instead we need to think about how this part of the space market works. As with SpaceX for example. While we do have private rocket makers (Blue Origin, SpaceX and so on) and we've very definitely got private customers for space work - all those telecoms firms with their satellites - it's still not true that the development money is really private sector. The sums required and the risks are really just too high - so, everyone depends to some extent on gaining public sector contracts.
Essentially, who NASA agrees to spend money upon is one of the determining factors of who is going to succeed in the private space race. The real message of this contract award is therefore that Intuitive is plugged into that patronage system. They can gain NASA contracts. Therefore they are viable - in the sense that if you can't get NASA contracts then you're unlikely to be viable in this space. That's a valuable thing for us to know.