Relativity Space's Bold Bet on Space Infrastructure: Valuation Risks and the Schmidt Era

Relativity Space, once a darling of the 3D-printed rocket revolution, now stands at a crossroads. Under the strategic overhaul led by Eric Schmidt—Google's former CEO and now Relativity's controlling shareholder—the company has abandoned its original vision of entirely additive-manufactured rockets in favor of a pragmatic pivot toward outsourced components and a singular focus on its Terran R rocket. This shift, paired with a sweeping recapitalization that centralized Schmidt's control, raises critical questions: Is Relativity positioning itself as a viable play for investors seeking exposure to space-based data infrastructure, or is it a high-risk gamble in a capital-starved industry?

The Structural Overhaul: Control via Preferred Stock

Schmidt's $1.2 billion investment in Relativity's March 2025 down-round wasn't just about capital—it was about control. By converting his Series 0 Preferred Stock into a governance mechanism that grants him disproportionate voting power (via terms allowing Series 0 Directors to cast votes equal to the total number of authorized board seats), Schmidt now holds de facto control over Relativity's strategic direction. This structural shift, which eliminated dual-class shares and streamlined equity into Common and two preferred series, also diluted existing venture capital investors to near-zero stakes.

The financial terms of the Series 0 Preferred are equally telling: a 30% annual dividend escalates to 45% post a “Triggering Event” (e.g., failure to meet milestones). This “golden leash” ensures Schmidt's influence isn't just operational but financially enforced, prioritizing returns over long-term reinvestment.

Strategic Pivot: From 3D Printing to Pragmatism

Relativity's pivot from its signature 3D-printed Terran 1 rocket—which failed its maiden launch in 2023—to the outsourced Terran R marks a stark departure from its original “factory of the future” narrative. The Terran R, now backed by $3 billion in launch contracts secured in 2024–25, relies on traditional manufacturing partnerships for cost efficiency. This trade-off between innovation and execution has calmed investor concerns about cash burn but risks eroding Relativity's technological differentiation.

The new focus on government and enterprise contracts (e.g., a $1.8 billion deal with NASA for lunar lander components) positions Relativity as a contractor in a growing space infrastructure market. However, reliance on such deals introduces execution risk: delays or budget cuts could destabilize cash flows.

Valuation Risks: Dilution and Dividend Strains

The recapitalization's most immediate impact is on equity holders. Existing investors, including early venture firms, saw their stakes diluted to near-zero as Schmidt's Series 0 Preferred became the dominant class. For new investors, this means entering a capital structure where voting power and dividends are prioritized for Schmidt's holdings, not common shareholders.

The reflects this tension: while secondary trading suggests a 13% rebound from March lows, the underlying valuation remains volatile. The 30–45% dividend demands on preferred stock could strain cash reserves if revenue growth lags, creating a precarious balance between paying investors and reinvesting in R&D.

The Opportunity: Data Infrastructure in Orbit

Schmidt's vision isn't just about rockets—it's about building the “cloud of space.” By aligning Relativity's Terran R launches with his broader goals for AI-driven space-based data centers, the company could become a critical supplier to future lunar or orbital infrastructure projects. Government contracts for NASA's Artemis program and private-sector demand for low-latency satellite networks (e.g., Starlink) create a multi-front revenue opportunity.

Crucially, the stock split reversal and simplified equity structure signal a stabilization effort, reducing governance complexity for potential institutional investors. If Relativity can execute its contracted launch schedule and secure follow-on deals, its valuation could rebound sharply—particularly if space infrastructure spending accelerates post-2026.

Investment Takeaways

• Risk Factors: High dividend obligations, execution dependency on government contracts, and loss of technological uniqueness via outsourcing.
• Reward Potential: A $3 billion contract backlog, Schmidt's network in tech and space policy, and the long-term thesis of space-based data infrastructure.

Recommendation: Relativity is a high-risk, high-reward play for investors with a 5+ year horizon. While the structural changes reduce governance chaos, the stock (or equity stake) remains speculative. Monitor cash burn post-2026 launch milestones and the success of the Terran R's inaugural flight. For risk-tolerant investors, this could be a foundational position in the nascent space infrastructure sector—but tread carefully.

In the race to monetize space, Relativity's gamble hinges on whether Schmidt's control and contractual wins can outweigh the dilution and debt of its past. The stars may align—but investors must decide if they're willing to bet on this cosmic pivot.