TAMPA, Fla. — British cybersecurity software developer Arqit has hired financial adviser Silverpeak to sell its space division following interest from potential buyers, according to a source close to the process.

The division’s assets include a quantum encryption satellite Redwire is building that is partly funded by the European Space Agency, the person told SpaceNews, along with patents, intellectual property, commercial contracts worth more than $65 million, and a team of around 40 engineers.

Arqit, which is listed on the NASDAQ stock exchange and due to report financial results May 17, and Silverpeak declined to comment.

Arqit announced plans in December to sell its partially built satellite after pivoting to a terrestrial method for distributing symmetric encryption keys capable of resisting attacks from quantum computers. 

Distributing these keys via ground networks would be cheaper and less risky than deploying a space-based platform, although quantum communications using fiber optic cables have a limited range compared with satellites better suited for covering vast distances.

Despite the technology’s infancy, Arqit says it continues to see demand for quantum encryption satellites from government and other customers that prefer not to send traffic across international cables.

Quantum-resistant cryptography is set to be a key component of IRIS² (Infrastructure for Resilience, Interconnectivity and Security by Satellite), Europe’s planned 6 billion euro ($6.5 billion) secure connectivity constellation.

The European Space Agency recently tasked a group led by operator SES to develop and operate a satellite in 2024 to validate quantum key distribution (QKD) technology.

SES said May 11 that the QKD payload for the group’s Eagle-1 satellite would be developed by Germany’s Tesat-Spacecom, a manufacturer of terminals for optical communications satellites.

Technologies being developed for quantum networking are seen as synergistic with the space-based optical communications market, where commercial interest is growing amid rising costs and demand for radio frequency spectrum.

Before deciding to sell its partially built quantum encryption satellite, Arqit had lined up a 2024 launch with Virgin Orbit, which is searching for a new owner after collapsing into bankruptcy earlier this year.

Like Arqit, Virgin Orbit listed shares publicly following a merger with a special purpose acquisition company (SPAC), a financial tool offering a fast-track to stock markets.

A SPAC merger requires less rigorous due diligence than a traditional stock market listing, leaving them open to overly optimistic growth projections in the search for investor support.

Multiple law firms have announced class action lawsuits over Arqit’s business projections, including one filed May 6 by Rosen Law Firm at the U.S. District Court for the Eastern District of New York (1:22-cv-02604, Glick v. Arqit Quantum Inc. et al.).

Arqit disclosed in its last financial update Dec. 14 that the U.S. Securities and Exchange Commission had also launched a “fact-finding inquiry” into the company’s 2021 SPAC merger, which Virgin Orbit had also invested in.

May 17 update: Arqit said in its earnings update that it is the largest unsecured creditor identified to date in Virgin Orbit’s Chapter 11 bankruptcy process with a $10 million claim. Arqit recorded $2.6 million in total income for the six months ended March 31, primarily from funds provided by the European Space Agency, compared with $12.3 million for the corresponding prior year period. The company’s operating loss was $34.6 million, compared with a $14.3 million loss for the six months to March 31, 2022.

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