UrtheCast Corp. (UR), the digital-imaging company whose largest shareholder is Fidelity Investments, has surged almost 40 percent in the past seven months as investors bet it has found an inexpensive niche in the $1.5 billion market for pictures from space.
Russian cosmonauts installed the Vancouver-based company’s two cameras on the International Space Station last week. Once testing is complete mid-year, UrtheCast plans to start selling images of everything from hurricanes to ship movements, Chief Executive Officer Scott Larson said. UrtheCast spent C$17 million ($15 million) developing its cameras, one of which can take video, he said.
“Other satellite companies easily spend several hundred millions of dollars getting their satellites in space,” Larson said in a Jan. 31 phone interview from Vancouver.
Private companies like Elon Musk’s Space Exploration Technologies Corp., known as SpaceX, are gaining influence in space technology as government agencies like the National Aeronautics and Space Administration face budget cuts. The market for space images is worth $1.5 billion and will grow to $3.5 billion by 2022, Kevin Wright, a Toronto-based analyst with Canaccord Genuity Group Inc. said in Jan.7 note to clients. Wright has a buy on the stock.
UrtheCast has surged 39 percent since completing a reverse takeover of Longford Energy Inc. and listing its shares on the Toronto Stock Exchange on June 27. The shares fell 1.5 percent to C$2.58 at 9:53 a.m. in Toronto today for a market value of C$162.1 million.
Pronounced “EarthCast,” the company’s name is a play on words in that you, the individual, are the cast of the videos taken, Christian Darbyshire, a spokesman for UrtheCast, said in an e-mail yesterday.
FMR LLC, the holding company for Boston-based Fidelity Investments, owns 11 percent of UrtheCast stock, according to data compiled by Bloomberg. Vincent Loporchio, a Fidelity spokesman, declined to comment, citing the firm’s policy not to discuss individual investment holdings. Tye Burt, former CEO of Kinross Gold Corp., and UrtheCast’s chairman, couldn’t immediately be reached for comment, according to Darbyshire.
Under the deal with the Russians, the space agency agreed to pay for the launch, installation and maintenance of UrtheCast’s cameras. Russia gets pictures of its own territory and UrtheCast gets the right to use -- and sell -- any other images the cameras produce.
UrtheCast has signed C$21 million worth of annual contracts to provide information to large clients like government forestry departments and mapping companies, Larson said, declining to name them. The company is expected to start generating sales at the end of June, Larson said.
Lower capital costs give UrtheCast the flexibility to be creative with how it distributes its pictures, Larson said. It plans to stream images online “in as near real time as we can,” he said. Developers will be able to use the data to build applications for anyone from farmers to non-profits who track illegal forest harvesting, Larson said.
The company can’t sell images to military customers, which make up a large part of the market, because the station can only be used for peaceful purposes, Eyal Ofir, a Toronto-based analyst with Clarus Securities Inc. said in a note to clients in September.
UrtheCast joins a burgeoning list of companies trying to make money from space images, including DigitalGlobe Inc. (DGI) of Longmont, Colorado and Skybox Imaging Inc., a closely-held startup based in Mountain View, California.
DigitalGlobe said in October it expected to spend $240 million on capital expenditures in 2013. The company will launch a new satellite this year which will “cost hundreds of millions of dollars” to build and put in space, a company spokesman said in an e-mail yesterday.
DigitalGlobe maps more than 1 billion square kilometers (386 million square miles) of images each year at a level of detail smaller than one meter, the spokesman said in the e-mail. “The products we deliver are the gold standard for accuracy, currency, completeness, and consistency,” she said.
Skybox launched its first mini-fridge-sized satellite in November, Dan Berkenstock, executive vice president and chief product officer said by phone yesterday from Mountain View.
“In taking our own videos already from space, and being able to sit and look at them, the power of that video really comes to the fore,” he said.
The company plans to launch 23 more satellites over the next several years to create a constellation of cameras. Each satellite costs about $20 million to put in space, Berkenstock said. The company has raised $91 million from several venture capital firms, including Khosla Ventures LLC.
DigitalGlobe, which is estimated to have 60 percent of the market, charges around $20,000 per still image, Ofir said in the September note. UrtheCast will be able to charge about the same, and more for video, said Ofir, who has a buy on the stock.
“People may end up buying Digital Globe imagery, Skybox videos and then UrtheCast videos because it’s a different angle or it’s a different time of day,” Ofir said, with videos of natural disasters a likely staple. “If you’re CNN or BBC or all these large news networks globally, it’s almost a no-brainer,” he said.
To be sure, the stock has been volatile. Shares slumped in late December when initial attempts at connecting the cameras were unsuccessful.
Some investors might point to the close relationship with the Russian government as a risk for UrtheCast, Ofir said. The space station is an international platform with control split among different countries, he said.
The Russian government already has spy satellites, Larson said. They wanted to be a part of this project so they could take the images and show the Russian public the value of the International Space Station, he said.
Peter Puccetti, founder of investment fund Goodwood Inc., helped orchestrate UrtheCast’s reverse takeover of Longford. He evaluated 45 options for the Longford listing and decided on UrtheCast, Puccetti said in an e-mail. Goodwood owns 2.6 percent of UrtheCast, according to Bloomberg data.
“This one, which I believe was No. 39, struck us as particularly interesting,” he said.
UrtheCast plans to release its first image from the space station in five to six weeks, Larson said.
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