Space investments – lottery or new opportunities for investors?

investments in space

The space industry has not been neglected by investors in recent years, as the exploration of the universe and space-related technologies offer great opportunities. Space investments are predominantly seen as long-term, with start-ups also attracting particular interest.

The Times reports that investors are investing record amounts in space technology startups for the second year in a row (at the end of 2022, such projects were funded to the tune of about $8.9bn). This year, according to the publication, the main investment trends will concern space broadband communications, as well as commercialisation of the revival of interest in flights to the Moon, with an influx of investment being recorded in both the space equipment manufacturing sector and data analysis.

Experts at Seraphim Space, a space technology investment firm, estimate that investment amounts remain at record highs and will increase as economic sentiment improves. Morgan Stanley analysts, in turn, believe that the total value of the space industry will reach $1 trillion by 2030, while Bank of America experts expect this figure to exceed $1.4 trillion.

Is it possible to make money in the space industry? Which securities are the most profitable? In these and other questions we learnt together with experts.

Space tourism

The current era is characterised by a rapid growth in the number of private space missions, including the first commercial flight to the International Space Station in 2021. The US retains its leadership position in this sector, but China, India and Japan have also recently seen a number of new commercial space companies emerge. UBS analysts estimate that the global space tourism industry will reach $3bn by 2030, up from $753m in 2019.

As the space tourism industry expands, private investment is playing an increasingly important role. Among the most successful private companies is SpaceX. Another bright representative in the space tourism industry is Virgin Galactic, which in 2020 managed to raise more than $800 million and go public. This was the first time that a space tourism company managed to enter the stock market.

Private investments continue to flow actively into the space tourism industry, and it is not excluded that in the future more and more companies will enter the market, opening up more opportunities for investors. Nevertheless, most experts consider investment in space tourism a risky venture, as it is difficult to guess which company will take off in a few years and be among the beneficiaries.

As of today, it is difficult to talk about Virgin Galactic’s long-term prospects. The company does not yet have a net profit and does not generate a stable free cash flow, and it needs a successful long series of commercial flights to improve even the sentiment.

Despite its notable success in growing its business, Virgin Galactic’s stock remains subject to increased volatility and cash flow remains unpredictable. Nevertheless, it is the brightest and most potentially promising player in space and space tourism, with shares to invest in now. “Virgin Galactic, which has been working on human spaceflight for more than 17 years, delivered its first commercial flight to the frontier of space at the end of June, signalling the start of regular commercial flights that will generate revenue for the company. The company reports that some 800 customers have already booked flights, with each seat on board costing between $250k and $450k. The company will report its second quarter earnings on 1 August after the close of trading in the US. According to forecasts, revenue in April-June will be 249.7% higher than last year’s value and will reach $1.26bn, while net loss will widen to $0.51 per share from $0.43 per share a year earlier,” the expert stressed.

Getting ready for takeoff

According to UBS analysts, the space industry is ready to take off, fuelled by more active private sector financing, major advances in satellite technology, accelerated development of new space applications and industries and, most importantly, a marked reduction in launch costs.

Experts state that at the current stage it is best to invest in publicly listed companies to reduce investment risk. At the same time, existing private companies as well as new space start-ups can open up new opportunities in the private capital markets.

SpaceX, Intuitive Machines, Astra Space and Rocket Lab look promising among US aerospace companies involved in launches, Nasdaq writes. It should be noted that the securities of the last three of the above companies are traded on the stock exchange. Intuitive Machines is not only involved in launch services, but also aims to provide access to the lunar surface, as well as lunar orbit dispatch and lunar distance communications. Astra Space, meanwhile, offers its launch services at one of the lowest prices, having made its first commercial launch into low-Earth orbit in 2021, just five years after its founding. Rocket Lab, for its part, operates the Electron light orbital rocket, which provides ad hoc launches of small satellites, and plans to build a larger Neutron rocket as early as 2024.

Among companies offering satellite communications services, Starlink, Amazon, Iridium Communications, EchoStar and Viasat are the most promising, according to the Nasdaq article. Of these, only Starlink has yet to go public.

We also advise looking at space-related funds. Among them are the narrow SPDR S&P Aerospace & Defence ETF and the broad Industrial Select Sector SPDR Fund, which includes shares of aerospace companies.

Development of space programmes in Russia

According to First Deputy Prime Minister Andrei Belousov, Russian private business is capable of making a breakthrough in the development of space technologies. Earlier this year, commenting on the signing of a co-operation agreement between business and the state on the roadmap “Promising Space Systems and Services”, he noted that the main innovation of this agreement is that a pool of interested companies and professionals in the space industry has been formed. All of them are ready to develop, produce and operate modern satellites and provide competitive services based on their use, and the government and Roscosmos, according to Belousov, undertake to support these companies and help at all stages of the life cycle of their products.

At the same time, representatives of the Ministry of Digital Development, Communications and Mass Media made proposals earlier this year to change legislation to encourage private capital to invest in space activities. In particular, it was proposed to make the tax regime for such companies comfortable and use other opportunities for financial incentives in this area, as well as to reform legislation by sector to create demand and monetary capacity.

Very recently there were reports that the Russian private space company SR Space together with T1 Holding are planning to be the first private companies in the Russian Federation to launch a rocket beyond the upper boundary of the atmosphere – the Karman Line. The agreement to develop the launch vehicle and launch it was signed during SPIEF-2023, with SR Space claiming the launch is scheduled for later this year. Once the project reaches the commercial stage, the flight frequency is expected to be once a week, including commercial payloads.

Earlier, namely in 2021, the management of SP Space (formerly known as Success Rockets) stated that the company aims to go public within 2-3 years and, if this happens, another public space company will appear on the Russian market.

RSC Energia and NPO Nauka are currently represented on the Russian market in this industry, states Albert Koroev of BKS World Investments, but their shares are low liquidity and free-float.

In the coming decades, we will probably no longer think of our world as just a planet, and Earth and space exploration, which is constantly expanding humanity’s view of the world, will open investors’ access to new investments.

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