Insights & Advice

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The Business of Space

Space! It holds the promise of riches beyond our wildest dreams—solar systems bursting with precious resources ripe for the taking. Just the idea of such prizes has set off a frenzied rush by global business entrepreneurs to claim stakes in this new frontier.

The private sector has increasingly pushed aside governments and their contractors in a frenzied bid to develop commercial space exploration. At the same time, using all their cost-cutting prowess to reduce the cost of putting people and objects into orbit, and that is only the first step.

This year, for example, there are three separate missions to Mars, which are scheduled to arrive in February. The Emirates Mars Mission is due to arrive next week on February 9th. Its task is to study weather cycles and the Mars atmosphere overall. A Taiwanese spacecraft will touch down two days later. Its orders are to map the surface of the Red Planet, do atmospheric tests, and launch a rover that will search for signs of life. Finally, a week later, on February 18th, NASA will land another rover on Mars’ Jezero Crater to collect soil samples, rocks, and hopefully return to earth with its treasures.

While all of this may send our blood racing and hearts pumping, the more mundane business of turning a profit in this fledgling industry is centered on the transportation side of commercial space. The budding business is built upon the bet that more and more companies will want to fill the skies with much-improved (and cheaper) nanosatellites constellations that will allow greatly expanded communications, imaging, and the use of scientific instruments to measure everything from temperature to energy consumption.

Over the next few years, an entirely new fleet of private sector rocket companies with names such as Virgin Galactic, SpaceX, Blue Origin, Alen, Astra, and Rocket Lab, are hoping to launch daily rockets laden with thousands of pounds of satellites into orbit for commercial and government use.

SpaceX, the company founded by electric vehicle pioneer, Elon Musk, is the frontrunner in this race for space. Last year, SpaceX launched astronauts to the International Space Station twice and is scheduled to do it again this year. If all goes as planned, expectations are that SpaceX will become the successor to the U.S. government’s former space shuttle program.

The company also planned to fly a mission for a Texas-based company that has purchased a trip for a crew of four tourists to the space station. Could this be a forerunner of a sort of private sector cruise line into space?

Although none of these ventures have yet to make a profit, stock investors anxiously await their debut as public companies. Virgin Galactic, the only pure play in space, has seen a doubling of its stock price in the last six months, but it is not the only public company involved in the industry. Aerospace giants Boeing, Lockheed Martin, and Northrop Grumman are also major players in this arena.  Additionally, there is an exchange traded fund (ETF), the Procure Space ETF, (symbol UFO) that is widely traded, which has gained 33% in price during the last three months.

Another space rocket startup, Astra, is planning to go public using a blank check company, or Special Purpose Acquisition Corporation (SPAC), in the near future, worth a $2.1 billion valuation, according to the Wall Street Journal. Space tug company, Momentus, founded in 2017 by Russian-born, Mikhail Kokorich, is also planning to go public via a SPAC, Stable Road Acquisition Corp, in a $1.2 billion transaction this year.

In addition, Ark Investment funds CEO, Cathie Wood, is also planning to launch a new space-focused ETF to join her stable of seven successful, disruptive technologies ETFs.

Critics of the space boom point to the fact that all these companies are losing money. The likelihood of profits, they say, could be years away (if ever). Space bulls argue that early investments in electric vehicles was derided with the same arguments and look what happened to those with the courage and vision to risk their capital.

For the people attracted to investing in some version of tomorrow’s Starfleet, be forewarned that it will require an enormous amount of patience, an extended time horizon, and possibly as much volatility as the Millennium Falcon’s frequent jumps into Hyperspace.

As for me, color me Buzz Lightyear, since I am already convinced that “infinity and beyond” could be the future of space investment.

 

Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.

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