Pentagon lends Rocket Lab and Stoke Space $300M as launch tightens

The Office of Strategic Capital, or OSC, is a Pentagon group created in 2022. Its job is to put money into companies that make technology the military calls vital. Think of it as a bank with a defense mission.

Both offers are conditional loan commitments. That means the Pentagon has promised to lend, but only if the company passes a list of checks first. OSC says each loan is subject to "various financial, legal, technical, investment, due diligence, and other requirements."

• October 26: a $150 million commitment to Stoke Space.
• November 9: a $150 million commitment to Rocket Lab.
• Earlier: a $150 million loan to LeoLabs, a company that tracks satellites, to build radar units.

Stoke Space and Rocket Lab are the first launch companies to get serious support from OSC. The office has been on a lending spree lately, with hundreds of millions of dollars going to battery, drone and chip makers.

The answer starts with SpaceX. It has stopped taking commercial orders for Falcon 9 launches for after 2028. The company wants to focus on Starship, its much bigger rocket. We covered Starship's first trip to orbit earlier.

SpaceX is winding down Falcon 9 for commercial customers, and the Pentagon is paying for backup.

Government launches on Falcon 9 and Falcon Heavy will go on for a while. The Space Force contract lets the military place orders through 2029. Launches under it can run through 2033. After that, if Starship delivers, SpaceX plans to retire Falcon for good.

Starship may one day carry national security satellites too. But SpaceX's first priority for it is launching its own Starlink internet satellites and its Starmind orbital data centers.

In real life Imagine the biggest delivery company in town tells shops it will stop booking new regular routes in two years. Any business that depends on it starts calling other couriers today. That is roughly what is happening across the launch market.

Since the 1990s, military space officials have followed a policy called assured access to space. In plain words: the US should always have at least two rockets that can carry its most sensitive satellites. One rocket grounded must not mean the whole program grounded.

For years the Pentagon paid for this with direct subsidies, development money and launch contracts at premium prices. Those deals gave the government a close look at its providers. They also gave it a place near the front of their launch schedules. Sometimes they simply kept a company in business.

Today the Space Force's mix of providers is SpaceX's Falcon family and United Launch Alliance's Vulcan rocket. Vulcan has been grounded twice in the last two years by problems with its solid rocket boosters. Those problems forced the Space Force to move several national security missions over to SpaceX.

By the numbers: Space Systems Command, the part of the Space Force that buys launches, now expects to need up to 249 medium-to-heavy launches through the early 2030s. That is more than double what it forecast just two years ago.

Several companies have been cleared to compete for pieces of that work:

• Blue Origin: the only one that has flown a rocket meeting the Space Force's requirements. Its expansion plans are in our story on New Glenn's Florida build-out.
• Rocket Lab, Stoke Space and Relativity Space: each is building its own medium or heavy rocket.
• Impulse Space: works on propulsion that moves satellites around once they are in space.
• SpaceX and United Launch Alliance: the two providers flying today.

The OSC loans aim to get new medium-class rockets from Stoke Space and Rocket Lab ready for military use.

Stoke Space's loan pays for a second launch pad at Cape Canaveral Space Force Station in Florida. A launch pad is the ground structure a rocket stands on and lifts off from. Without more pads, even a perfect rocket can only fly so often.

The new pad would support the Nova Block 2 rocket. That is an upgraded version of Nova Pathfinder, the company's fully reusable rocket, which is set to debut sometime next year. Fully reusable means both stages are meant to come back and fly again, not just the booster.

"By supporting the construction of additional launch infrastructure, this commitment would enhance the overall capacity and resilience of the commercial space industrial base," said Jordan Sebold, a senior managing director of investments at OSC.

The money is for Neutron, Rocket Lab's partially reusable rocket, built to carry up to 13 metric tons to low Earth orbit. That is the zone a few hundred miles up where most satellites fly. Neutron has seven methane-fueled Archimedes engines on its booster and a carbon-composite body. Rocket Lab says it is scheduled to make its first launch next year.

OSC says the loan would support faster vehicle delivery and processing. It would also pay for more ships to recover and move Neutron, and for factory upgrades that raise output of composite parts and engines. A further goal is less time between launches once the rocket is flying.

Rocket Lab's chief financial officer, Adam Spice, called the terms "very attractive" on the company's earnings call. "We always take it when we can get it," he said. "It gives us additional capital to scale key parts of our business, Neutron in particular."

On that call, Rocket Lab also said the loan carries an interest rate of SOFR plus 100 basis points. SOFR is a standard benchmark rate for lending in US dollars. One hundred basis points is one percentage point on top of it.

The big picture: Rocket Lab raised the listed price of a Neutron launch from $55 million to $70 million. It says bookings surged. The company now has a backlog of 117 launches on contract, counting Neutron missions and its smaller Electron rocket. A backlog is the list of work already sold but not yet done.

It also signed eight commercial Neutron contracts in the third quarter. Its launch backlog now stretches into the early 2030s. Neutron is set to fly from the Mid-Atlantic Regional Spaceport in Virginia.

Founder and CEO Peter Beck summed up the moment: "Launch is extremely constrained, and that is exactly the situation we predicted."

The catch: Neutron has not flown yet. Both loans are conditional, and both rockets still have to reach orbit for the first time. A higher price on a rocket that does not exist yet is a bet on demand, not proof of it.

• Satellite services: if you use satellite internet, mapping or weather data, more rocket choices should mean fewer launch delays over time.
• Prices: a tight launch market pushes prices up, as Neutron's jump from $55 million to $70 million shows.
• Government role: the Pentagon is using loans, not only contracts, to shape which US rockets exist.
• Wait and see: neither Neutron nor Nova has flown, so the real test comes next year.