Electro Optic Systems (ASX:EOS) share price rallies 10% on “significant milestone”

Electro Optic Systems shares are racing higher…

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The Electro Optic Systems Holdings Limited (ASX: EOS) share price is accelerating during afternoon trade. Its shares spent most of the day frozen pending a price-sensitive announcement by the defence contractor.

At the time of writing, Electro Optic Systems shares are up 10.82% to $3.79

What did Electro Optic Systems announce?

In today’s statement, Electro Optic Systems and its wholly-owned Unites States subsidiary SpaceLink, advised it has reached a significant milestone. This relates to the manufacture and launch of the initial constellation of four high-capacity optical relay satellites.

Following a comprehensive tender process, leading satellite manufacturer, OHB Systems AG (OHB) has been selected as the preferred tenderer.

Currently, the parties involved are engaged in advanced negotiations with a formal contract expected to be signed next week.

The total value of the agreement is expected to exceed US$300 million, subject to relevant terms and conditions.

Should the contract go ahead, OHB will be required to deliver four high-capacity relay satellites in Q1 2024. Payments for the work completed is to be based on achieving specific milestones over the 30-month term.

Electro Optic Systems noted that the satellites to be manufactured by OHB will include multiple subsystems and components. This includes digital payload processing, electric propulsion, and state of the art optical inter-satellite links.

Furthermore, the four medium-earth orbit (MEO) spacecraft must meet United States cybersecurity requirements. SpaceLink is aiming to provide a secure transport layer for critical communications between the satellites and ground stations.

OHB intends to invest US$25 million into SpaceLink in the first tranche of financing for the project. It is anticipated that this will be in the form of a SpaceLink Pre- IPO Convertible Note.

Electro Optic Systems share price snapshot

The past 12 months have been a turbulent ride for investors, with the company’s shares sinking 40%. However, when looking at a 5-year timeframe, its shares are up roughly 200%.

Electro Optic Systems commands a market capitalisation of more than $516 million and has approximately 151 million shares on issue.

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Motley Fool contributor Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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