The biggest space event since the first man on the moon happened last weekend. Virgin Galactic’s CEO Richard Branson put his life on the line to prove the capability of its business model. What does this change in the space industry and what is the potential of the space economy?
Richard Branson experiencing microgravity (Source: cnet.com)
What happened with virgin galactic?
Last weekend, the founder and CEO of Virgin Galactic Richard Branson boarded the Virgin VSS Unity, tripling the speed of sound to reach the edge of space, 50 miles above the Earth’s surface. We have a new type of UFO, called the UFB: Unidentified Flying Billionaire. This is likely the most important space happening since the moon landing in 1969.
“Having flown to space, I can see how Virgin Galactic is the spaceline for Earth,” Branson said after his flight. “We’re here to make space more accessible to all, and we’re going to turn the next generation of dreamers to the next generation of astronauts.”
Branson is officially the first billionaire to create a space company and actually travel to space in its own spacecraft. Jeff Bezos had already announced a flight, but Branson wanted to be there first and moved his departure to beat his billionaire rival by 9 days. Amazon’s founder should take off in a Blue Origin space plane on July 20th, accompanied by his brother and a mysterious investor who paid $28 million to join the adventure. That is around $2.5 million per minute of flight, no big deal.
Virgin Galactic: Richard Branson flying into space carried by two aircrafts (Source: BBC)
Possibilities for the space economy
Believe it or not, this story is not only an ego fight between billionaires. These trips are a real advancement for NASA-sponsored space tourism (other sightseeing flights or even a table for two at the international space station…).
Last year in May, Elon Musk’s SpaceX was the first private company to send a human to space, and now, Virgin successfully performed the first private human spaceflight. ETA for space tourists? 2022.
However, while space tourism will fetch the lofty sum of $250,000 per ticket and could generate close to $4 billion in annual revenue by 2030, according to an estimate last year from UBS – plus, you become half famous doing so, we guess – it is only a tiny portion of the space-economy potential. These under-categories include:
This is, for now, the largest space industry sector, which is now able to provide everything from WiFi and GPS to Telecom as well a weather sensing. As soon as next month, customers will be able to use satellites from SpaceX’s Starlink project, which already launched over a thousand high speed internet providing satellites in the low earth orbit.
As always, the military will be present to supervise and develop the latest technologies. There is a 6th branch of the US army called the Space Force, founded in 2019 by President Trump. The Pentagon is asking for a $21 billion investment in space security. Other defence giants like Lockheed Martin and Boeing also have a space division and are working on military-related space innovation. The time where we will see X-wing looking spacecraft capable of space combat does not seem so far anymore.
Crazy NASA missions
Finally, NASA missions are one of the biggest parts of the space exploration. Boeing is developing a spacecraft for NASA flights, and Elon Musk recently signed a $2.9 billion contract to develop a NASA lunar lander, beating Jeff Bezos. Seems like they will not be any Prime Moon delivery soon, what a shame.
Over the longer-term , we can think about the colonization of the moon and Mars. This development will also involve manufacturing all the necessary material for such projects and expeditions.
We will most likely mine natural resources from other planets and bring it back to Earth, and we could even think about throwing our dirty ugly factories on another planet and export only the end-product back to earth. And hey if we are to meet aliens, maybe they could love Nike shoes and become part of our economy? New customers boom.
Can one invest without being a venture capital fund?
The answer is yes. The space industry is risky because it is still maturing, but it does seem to be accelerating. In addition to the $9 billion invested in space-related start-ups last year – a new record, double what was invested in 2018 – there are plenty of opportunities for smaller players to invest in the outer space economy. When this economy develops, it might become the next major opportunity.
5 Space stocks to consider
Virgin Galactic – Virgin Galactic became the first publicly traded commercial space tourism in 2019. After successfully having sent their CEO into space, they did not only beat Jeff Bezos’s Blue Origin, but are also setting the path for the start of a commercial service in 2022. The company is also active in developing hypersonic continental travel and has entered into a Space Act Agreement with Nasa to develop sustainable supersonic vehicles. Regarding space tourism, the company has reported 600 reservations for future flights backed by $80 million in deposits.
and Amazon – Investing into these companies is also investing into space! These cloud providers are about to become space cloud providers, working with satellite companies to build the world connectivity of tomorrow.
Boeing– Boeing is one of the original space stocks! let us not forget that they helped building the first stage of the Saturn V rocket that helped propel Apollo 11 to the moon in 1969. Today, Boeing keeps innovating and building satellites for NASA, as well as managing the International Space Station.
Lockheed Martin – Lockheed Martin also helped in the Apollo 11 mission, having built the solid propellant launch motor and the pitch control motor for the spacecraft. They are now developing the deep-space Orion for the SLS rocket to carry astronauts into deep space among other projects.
Maxar Technologies – Maxar is one of the smaller space stocks but is also working with NASA to build the first components of the Lunar Gateway space station. They are also building satellites – providing satellite imagery and map data – as well as robotics that will be used in space.
3 well-known Space ETFs
Procure Space ETF (UFO) – The Procure Space ETF is a space-related ETF that was launched back in April 2019. It includes holdings of Maxar, Intesat, Airbus or Boeing and 28 other companies that derive at least 20% of their revenue from space-related activities. The ETF is up 18.49% year to date with $128 million in net assets.
ARK Space Exploration ETF (ARKX) – Cathie Wood’s ARK Space Exploration ETF (ARKX) launched earlier this year. Although it has holding of Amazon and Boeing, it exited Virgin Galactic recently.
SPDR S&P Kensho Final Frontiers ETF – This is the oldest player on the market, having launched in 2018. However, it is not all focused on space, as its description talks about deep space but also deep sea. It has holdings of stocks involved in space but also other areas such as defense, various research companies and even industrial conglomerates.
Today, space customers are mainly large corporations and governments, but this will most likely change. First, there will be access to space internet and space tourism, and perhaps, in a more distant future, we might be able to colonize the moon and even Mars.
In any case, investing in space is now possible for anyone thanks to an increasing number of space companies going public, and there is no need to be a large VC to own companies we believe in.