Redwire: Why It Might Be 2021 All Over Again

2025-03-26 11:22:33 ET

Summary

• Redwire's valuation and growth prospects look attractive, but a closer look at the business model suggests some caution.
• The pending merger with UAV manufacturer Edge Autonomy too may hide some risks: Edge's growth has been driven by Ukraine, while its P-E owners accepted a modest multiple.
• Redwire's 2024 performance showed revenue growth but declining profit, raising further concern about long-term structural profitability.
• Secular trends clearly are in Redwire's favor, but both execution and perhaps a better valuation are required from here.

When, in 2021, Redwire ( RDW ) announced that it was going public via a SPAC (special purpose acquisition company) merger, there was a catch. Redwire had a seemingly strong story, as a "picks and shovels" play on growing demand for space exploration, particularly from the private sector.

But the SPAC deal was done at an enterprise value of about $615 million — yet private equity firm AE Industrial Partners had spent far less to actually build the company. As I noted later that year, per Redwire filings the company was built on acquisitions that cost just $149 million , less than one-fourth the valuation implied by the SPAC merger. Those acquisitions were all completed within a year leading up to the merger announcement in February, raising real questions about whether the valuation actually made any sense....

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