Maxar Technologies, Inc. (NYSE:MAXR) has reported that their WorldView-4 satellite had experienced some problems in its control moment gyros. The failure of the CMGs resulted in the loss of axis stability, and thus the satellite is unable to collect imagery.
Following this news of the failure of the WorldView-4 satellite, the company stock hit a historic low and its shares tumbled by 32% on Monday the most within the day since October.
Failure of the WorldView-4 satellite
Maxar is working with suppliers to try and restore the functionality of the satellite, but their efforts are far from being successful.
In a statement, the company indicated theta they don’t expect worldVioew-4 to recover and it will no longer be producing working imagery.
However, Maxar has placed the satellite under safe configuration, and they are expected to continue monitoring its location and its state.
WorldView-4 satellite is a product of Lockheed Martin Space Systems Co. (NYSE:LMT) with Honeywell International, Inc. (NYSE:HON) providing the control moment gyros.
The significance of WorldView-4 to Maxar
A large share of Maxar’s growth in the near-term was dependent of the satellite, and its failure will affect the company as they are likely to lose potential earnings and sales for the 2019 and 2020 fiscal years.
GeoEye acquired WorldView-4 in 2013 before their merger with DigitalGlobe and the satellite got launched in 2016. In 2018, the WorldView-4 generated approximately $85 million in revenue, and an estimate of the satellite’s book value is $155 million inclusive of related assets as of December 31, 2018.
If they do not recover WorldView-4, then its net book value shall be written off for the fourth quarter of 2018.
Currently, the company has contingency plans and mitigation measures underway that enable them to assess the possibility of using other satellites to replace the imagery that had been collected by WorldView-4. The move expects to meet their customer commitments as well as obligations.
The company is, however, being optimistic that they will manage to offset the $10-$15 million annual revenue that the satellite was bringing. They will equally work towards minimizing the potential impact of WorldView-4 in their future financial results.
Decline in stock
In 2017, Maxar completed the purchase of DigitalGlobe in a $2.3 million deal, and they changed their name from MacDonald, Dettwiler and Associates Ltd. The move was to give them access to profitable government business.
However, since the closing of the deal, their stock has lost its value by 81%. Although its shares were a “strong sell”, the missing of the Q3 earnings and the cash flow challenges that the company has been facing saw their stock tumble further. Maxar amended their credit agreement, but they still have a total debt of approximately $3.1 billion.
On Monday the shares were trading at $8.03 but following the revelation of the failure of WorldView-4 satellite the shares closed on January 8, at $6.03 which was a decline of -24.91%.
On January 8, the stock opened at $7.30, and it registered a daily high of $7.31 and a low of $5.04 before closing the day at $6.03 which is the current stock price.
Over the past year, they had a 52-week range high of $64.00 and a low of $5.04 with an average share volume of 11.1 million.
Maxar is working on recovering the full amount of the satellite since it is insured for $183 million although it has a net value of $155 million.
WorldView-4 was one of the key satellites of Maxar, and they expect to launch the WorldView Legion Constellation in 2021 to increase their imaging capabilities for their customers.