TheChek News Flow

DAX:

MDAX:

SDAX:

Space start-ups jostle with defence giants for Nato billions

Companies hope military appetite for commercial services will revive fortunes but obstacles remain

Russia launched a military satellite this summer that began behaving in unusual and potentially threatening ways.

Instead of orbiting on a stable belt followed by most satellites, it began to see-saw above and below the normal path, edging close to spacecraft owned by foreign militaries and private companies. Days later, the satellite appeared to launch an unknown object, which continued to fly close by.

“We have never seen anything like it,” said Paul Graziani, chief executive of Comspoc, a space monitoring software company.

Such unexplained events are multiplying, with Chinese satellites also performing a growing number of alarming manoeuvres.

They come as a global rearmament drive is spurring a wave of excitement in space tech. S&P’s Kensho final frontiers index — which mainly tracks companies innovating in deep space — has jumped 35 per cent since April. Some businesses are pivoting from climate monitoring to security, while others look to buy established defence suppliers to tap into the new funds.

But success is far from guaranteed, as armies prioritise existing budgetary gaps, while early-stage space companies are forced to compete with defence giants such as Lockheed Martin and Northrop Grumman.

Many investors were burned by the buzz around the last promised space tech revolution. Of 13 companies that went public between 2018 and 2022, only four trade above their offer price, while some others have been acquired, gone bust or quit the market.

This time, their hopes are founded on pledges by governments from Washington to Berlin and Tokyo to tap commercial providers for faster, cheaper access to the latest technology.

Nato, the Pentagon and US Space Force have all published plans to invest in commercial services. The White House has invited “non-traditional” contractors into its $175bn Golden Dome missile shield, and Germany’s €650bn defence plan also seeks new, more agile suppliers.

“Commercial space is fundamental to our operations,” Major General Michael Traut, Germany’s Space Command head, said at a recent conference.

The money up for grabs is potentially enormous. If Nato countries meet their pledge of spending 5 per cent of GDP on security by 2035, that could add $2.7tn to annual defence and security spending, according to the Stockholm International Peace Research Institute.

Space companies are pivoting to take their piece. Elon Musk’s Starlink had already established dominance in satellite broadband when the technology became essential in Ukraine’s defence against Russia. In 2023, he unveiled Starshield, targeted specifically at military customers.

Earth observation companies, once focused on tracking the impact of climate change, now find ready demand for intelligence and reconnaissance services. In July, Planet Labs signed a €240mn contract with the German government for high-resolution images. That deal was struck in weeks — and defence now makes up half of Planet’s turnover, said chief executive Will Marshall.

Companies are pitching their services as off-the-shelf, lower cost options for militaries struggling with enormous budget gaps. “Countries can’t wait 10 years to put up satellites,” Marshall said.

Finland’s Iceye, which gained prominence for giving Ukraine access to a radar satellite, said it was seeing strong interest from other governments. “If you buy four satellites sovereignly, you will always have that minimum capability,” said Joost Elstak, Iceye’s head of missions. “By teaming with partners, you could get higher coverage.”

Private equity has taken notice. After Russia’s full-scale invasion underscored the importance of rapid imagery, Advent International in 2023 acquired Planet Labs’ competitor Maxar. “National security on earth extends to national security in space,” said Advent managing partner Shonnel Malani.

Yet the windfall may not be as big as some had hoped. McKinsey estimates that, by 2030, annual defence spending by European Nato allies will double to €800bn. Spending on space hardware may also double — but still make up only about 1 per cent.

After years of under-investment, there are too many “black holes” in defence budgets, from personnel to ammunition stockpiles — particularly in Europe, said Bruce McClintock of think-tank Rand’s Space Enterprise Initiative. “There is a whole long list of terrestrial problems,” he said. “Space is certainly important, but it is not at the top of the list for many European countries.”

Europe’s budget for military space might grow 10-15 per cent annually in the future, said Pierre Lionnet, director of research at trade body ASD Eurospace, “but that will not be transformational”.

Meanwhile, new entrants face incumbents with decades of entrenched relationships, said Graziani, whose company provides governments and other customers with software to monitor objects in space.

“The commercial guys are seen as invading organisms,” Graziani said. Procurement agencies “have this immune system that tries to kill us — it has no intention of allowing us to come in”, he added. “We’re all just getting table scraps.”

Luca Rossettini, chief executive of space logistics company D-Orbit, argues governments need to rethink risk-averse procurement practices, which require new companies to spend years proving themselves. “We cannot afford 10 years to test a new company,” he said.

Some firms hope to bypass those barriers by buying established local defence suppliers. D-Orbit and Canadian company MDA Space say they are scouting acquisitions. These could “open up new pipelines for us”, said MDA chief executive Mike Greenley.

Big defence players, meanwhile, suggest governments that lack the deep institutional expertise in space may be reluctant to rely heavily on commercial solutions.

“They are still sorting out what can be bought commercially, what must be kept under national control and what can be developed with allies,” said Nik Smith, Lockheed Martin’s Europe and UK regional director. “That uncertainty remains a challenge.”

Despite the obstacles, the commercial space industry believes its moment has come. Mark Boggett, chief executive of Seraphim Space, argues the sector could capture 10 to 20 per cent of the global increase in defence budgets — a figure he admits has been greeted with scepticism.

Those critics have failed to recognise the shift in defence needs, he said. “The past is not a guide to where this money will be required. Conflict will be less about tanks and helicopters and more about digital capability. There is a whole new requirement for where this money is going to be allocated.”

Anglo American’s $50bn Teck deal sparks Canadian unease

Doubts voiced about whether ‘merger of equals’ was best for the Vancouver-based company and the country

Anglo American’s bid to combine with Teck Resources has sparked unease in Canada, where investors, analysts and political commentators have voiced doubts about whether the $50bn deal was best for the company and the country.

The nil-premium, all-share deal announced last week has received broad support from big funds invested in both mining companies, but perturbed some in Teck’s home country.

One Teck shareholder pointed out that the deal was happening at a low point for the company’s shares, which have fallen as a result of poor performance at its flagship Quebrada Blanca mine in Chile.

“Teck can easily create more value just by executing” their business plan, said Bryan Pilsworth, a portfolio manager at Toronto investment firm Foyston, Gorden and Payne. “While offers come and go, we think it’s better for Teck to get its own valuation higher before entertaining mergers.”

Dennis da Silva, senior portfolio manager at Toronto-based Middlefield, said he had been caught “off guard” by the deal announced last week, and that many in would be displeased by the absence of a premium.

“I’m not surprised people have a view that this could be negative from a Canadian perspective,” said the Teck shareholder, although he was happy for it to proceed. “It wasn’t the 20 or 30 per cent [premium] people always hope for or expect when you see a transaction like this.”

The deal has irrevocable support from Teck’s controlling shareholder, Norm Keevil, who holds a majority of the company’s supervoting shares. It will need approval from two-thirds of Teck’s class A and class B shareholders as well as 50 per cent of Anglo shareholders, with these vote expected in the coming months.

Teck said the 20 per cent jump in its share price since the deal was announced represented a “significant premium”.

“Opportunities like this don’t come around often — and they don’t wait,” the company said in a statement to the Financial Times.

Yet regulatory approval from Canada, which tightened its takeover rules under the Investment Canada Act after Glencore’s bid for Teck in 2023, may prove challenging.

The combined Anglo Teck will be headquartered in Vancouver, in an effort to allay concerns for the Canadian authorities, but will retain its primary listing in London.

Some in Canada view this arrangement as a figleaf. Heather Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute think-tank, said Canadians should be worried that their leading miners were being absorbed by foreign entities.

“We’re a mining nation but don’t have a single company in the global top tier,” she said. “The Investment Canada Act was meant to stop the bleeding. This deal seems structured in a way to skirt those concerns, with its headquarters in Vancouver.” 

Canada’s industry minister Mélanie Joly welcomed the “new investment in our mining sector” and echoed the companies’ language that it was a “merger of equals,” while adding that it triggered a review under the ICA. British Columbia premier David Eby called the deal a “remarkable vote of confidence” in his province.

Yet John Manley, a former Liberal party finance minister, was critical of a transaction that will leave Anglo shareholders with almost two-thirds of the combined group.

“I don’t see it as a merger of equals, I see it as a takeover by Anglo,” he said, while acknowledging that it would likely go ahead.

The deal is a sensitive subject for Canada’s leading institutional investors such as the Royal Bank of Canada, TD Bank and Bank of Montreal, who all declined to comment. The Prospectors and Developers Association of Canada and the Mining Association of Canada, the main industry bodies, also chose not to comment.

Subrata Bhattacharjee, a foreign investment specialist at law firm Borden Ladner Gervais, said the ICA review into Anglo Teck would be “complex” due to the Canadian company’s prominence in critical minerals.

“The Canadian government will expect to hear more from the parties about why this is an exceptional circumstance in order to justify its approval,” he explained.

The expected 12 to 18 months it will take to get the shareholder and regulatory approvals needed also present an opportunity for rival miners to make their own offers.

Analysts and investors have speculated that the likes of Glencore and BHP could counter bid and scupper the deal. BHP failed in a bid for Anglo last year and Glencore previously tried to buy Teck. BHP and Glencore declined to comment.

Teck has said the deal would create value for shareholders, particularly because of the synergies of combining operations at Quebrada Blanca and Anglo’s Collahuasi mine.

But others remain unconvinced. “The timing of this deal is hard to understand from a Teck perspective,” Scotiabank analyst Orest Wowkodaw wrote in a note to clients.

“The relatively modest implied premium, along with the loss of a Canadian mining champion and the primary listing, are all disappointments,” he said.

Middlefield’s da Silva pointed out that only about 25 to 30 per cent of Teck’s value came from its British Columbia operations, because “although the mind is in Canada, the heart is elsewhere” — notably Chile.

“Putting aside the Canadian aspect of it, from a purely quantitative perspective, I like what I see,” he said. Investors “just look at their financial statements every month and want to see it’s growing,” he added.

Meta struggles to decouple from Chinese supplier of AI smart glasses

Goertek tightens grip on US tech giant’s supply chain, even as Zuckerberg aligns with Trump’s anti-China stance

A leading Chinese hardware maker is taking a stronger grip of the supply chain around Meta’s artificial intelligence-powered spectacles, despite the US tech giant seeking to align with the Trump administration’s anti-Beijing stance.

Shandong-based Goertek has increased its stranglehold over the smart glasses industry, and the social media platform’s own extended supply chain, through a spate of dealmaking.

It was also manufacturing the forthcoming iteration of Meta’s smart glasses, dubbed “Hypernova”, according to people familiar with the matter, which are expected to be unveiled this week.

The Chinese hardware supplier’s dealmaking includes taking control of Shanghai OmniLight, which makes micro-nano optical devices used in smart glasses, and helping to finance a takeover of Plessey, a UK-based optics supplier to Meta.

Those moves come as Meta has attempted to diversify its hardware supply chain outside China. This year, the US company started some production of its Quest virtual reality headsets in Vietnam, according to people familiar with the matter. But Goertek remains one of its main hardware partners in Vietnam, one person said.  

“Goertek is very aggressive. Early on, they spotted the opportunity presented by the metaverse,” said someone familiar with the situation. “Meta has no choice but to work with them because they are the most stable and reliable supplier for key components.”

The continued reliance on Goertek for its next-generation wearable devices stands in marked contrast to Meta chief Mark Zuckerberg’s hawkish turn on China.

The Facebook platform was banned in China in 2008, but Zuckerberg continued to lobby to expand its services in the country. Those efforts failed, allowing Chinese rivals to take control of the market.

By this year, Zuckerberg had told President Donald Trump of the importance of the US dominating on AI against China, according to people familiar with these discussions. 

Goertek’s strategies have previously caused concern at Meta. In 2022, Facebook’s parent company found that the Chinese group had started selling a cheaper version of its VR glasses model on local ecommerce platforms that were similar to the Quest, according to people familiar with the matter.

Meta executives debated launching a lawsuit against its Chinese supplier, but ultimately decided against pursuing a case, the people said. 

Goertek manufactures Meta’s virtual reality Quest headsets and its popular Ray-Ban smart glasses, while providing some components to the company. Meta also sources components from other suppliers from countries such as Japan and the US.

It said: “We have a robust, diversified supply chain so we’re not solely dependent on any one manufacturer, and we’re constantly reviewing and exploring supply chain opportunities around the world.”

Goertek did not respond to a request for comment.

Meta bought virtual reality headset maker Oculus in 2014, renaming the headset to Quest when it announced its multibillion-dollar plan in 2021 to build an avatar-filled “metaverse”, which it said would be accessed by wearable devices.

More recently, Zuckerberg has pivoted to becoming an “AI leader”, which has included racing to develop more lightweight wearable devices that are powered by its AI models. 

Meta is also collaborating with the US government on efforts to modernise its military technology. Andrew Bosworth, Meta’s chief technology officer, was this June commissioned as a reserve lieutenant colonel with the Department of Defense, advising on the use of AI for military purposes. Meta also recently announced a partnership with defence tech group Anduril around designing VR and AR headsets for use by the US army.

The Ray-Ban Meta glasses, which Meta sells in partnership with eyewear group EssilorLuxottica and feature inbuilt speakers and cameras, became a surprise hit among consumers after their launch in September 2023, selling 2mn pairs by February 2025.

Meta’s Hypernova smart glasses would for the first time have a small display on one of the lenses, according to two people familiar with the matter and first reported by Bloomberg, overlaying notifications or responses from Meta’s AI assistant on to the real world.