PRESS RELEASE: Looming Recession Puts Space and Tech Employees on High Alert

Looming Recession Puts Space and Technology Employees with Equity Compensation on High Alert

Wealth manager says space and technology employees with stock options can better weather the potential downturn with sound financial planning.   

LONG BEACH, CA (July 23, 2022) – The current economic conditions do not necessarily mean a recession is coming, but they do not bode well for a fledgling private space industry that is heavily reliant on free-flowing capital to fund their big budget operations.

Tech companies are not immune either.  After experiencing tremendous growth over the past few years, this sector has recently seen massive selloffs.  Many tech darlings are down as much as 80% from December highs. If that is not bad enough, technology employees face potential hiring freezes and further rounds of layoffs. CNBC reports that over the past few months, an increasing number of companies are painting a divergent picture of what the labor market may soon look like. Tech giants Uber, Meta, and Microsoft have all announced they are slowing hiring amid raging inflation, rising interest rates, and intensified talks of a recession. 

The New York Times columnist Paul Krugman wrote in a July 12 piece that gross domestic product shrank in the first quarter, shrinkage is possible again in the next quarter, and at least a moderate economic slowdown may be in the works. As a result, companies are beginning to reduce their earnings estimates guidance. With weaker guidance, high growth industries such as space and technology will start cutting costs to keep their margins.

As a result of the current economic climate, private equity firms are pulling back from newer and riskier ventures – two of the defining characteristics of space and tech startups.  If the economy does not get back on track, space and tech startups may find themselves in an unkind environment where unproven business models with less funding do not survive while more mature companies face consolidation and layoffs.

Space News recently reported that signs of a private equity pullback may already be a reality. In a new report, Quality Analytics, a strategic market research firm focused on the satellite and space industry, noted that no public equity financing was completed during the month of June. 

But it’s not all bad news. According to Space News, United Launch Alliance CEO Tory Bruno stated that he found an upside to the potential downturn, “There may be some companies that would have been great to have saved. But the ones that do get invested in are going to get a lot more attention and have a better chance of surviving.”

The threat of a private space funding slowdown and a reset in technology has been watched closely by Derek Munchow, Managing Partner with Augustus Wealth.  Munchow is a financial planner specializing in equity compensation for space and technology employees. He has been advising his clients to funnel the energy they are expending worrying about what is next into forethought and better financial planning.

Munchow said “Fear is a strong motivator, and investor caution means we should all take note.  But before running for the hills or refreshing your resume, now is the time for employees with stock options to start planning and protecting their hard-earned equity compensation.”

Munchow’s advice to private space and tech employees with equity includes:

• Layoffs happen without warning. If your future with the company is uncertain, then it is a good idea to revisit your stock options and have a plan in place in case you get laid off.
• You will typically have 90 days to exercise your options. That does not give you a lot of time to make informed decisions. Making poor decisions with equity compensation can be very costly.
• Exercising is not always straightforward. Ensure you can answer the following questions:
  • Are your options in the money?
  • How are you going to pay for them?
  • Are you making the decision to exercise with the bigger picture in mind (financial goals, expenses, taxes, etc.)?

“By doing a little work right now, or better yet, by contacting their financial planner or tax professional, employees can give themselves peace of mind, and perhaps even turn these worrisome times into an opportunity to make a better future for themselves and their families,” Munchow added.

 

 

 

 

DISCLOSURE:

Augustus Wealth, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Augustus Wealth, LLC and its representatives are properly licensed or exempt from licensure. This financial planning assessment is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. This assessment is built based off information provided by the client and cannot be relied upon as financial advice. No advice may be rendered by Augustus Wealth, LLC unless a client service agreement is in place.