An alien experience is the new must-have for billionaires. This week Jeff Bezos, the Amazon chief, took a trip aboard New Shepard, a rocket built by his Blue Origin company. Sir Richard Branson was a passenger on a Virgin Galactic flight, while Elon Musk wants to orbit Earth in one of his SpaceX capsules.
These missions are considered by many to be expensive joyriding.
But, as wise investors realize, billionaires tend to have an ulterior motive, even when fulfilling a childhood dream.
Bezos, Branson and Musk conduct personal research into the 21st-century space race — whose participants could earn $1 trillion in sales by 2040, Morgan Stanley predicts.
The need for faster communication on this planet is the main driver of this alien industrial revolution, which will help agriculture, among other things. Crop health can be monitored from space.
Despite criticizing the environmental impact of the billionaires’ outings, Chad Anderson of New York venture capital fund Space Capital says, “Without space, we wouldn’t know anything about climate change and wouldn’t have the resources to tackle the biggest challenges.”
In the second quarter of this year, U.S. space companies received a record $4.5 billion in funding, according to Space Capital, which divides these companies into three categories: infrastructure, application and distribution.
Infrastructure companies build rockets and satellites whose costs fall sharply. The price of a shoebox-sized satellite is about $100,000, meaning 100,000 will be in orbit in the next ten years, up from about 3,400 today.
Application companies focus on services such as navigation required by autonomous vehicles, drones, robots and taxis, both terrestrial and airborne (yes, they exist).
Distribution companies are developing technologies to link terrestrial systems to space networks.
The impossibility of assessing the viability of the technologies behind these ventures—and the gamble involved—will be why some investors never boldly venture into space, except perhaps as tourists become more affordable as tickets.
Hurry up: Wise investors realize billionaires often have an ulterior motive, even when fulfilling a childhood dream
Rob Burgeman of Brewin Dolphin likens space to the Wild West, where great fortunes but also catastrophic losses were made. But given the disruption the space race could cause, a small amount of exposure to the companies in this league could update your portfolio.
Burgeman considers the following worth considering: Loral Space & Communications, a telecom satellite company; L3 Harris Technologies, which makes space communications equipment, and Lockheed Martin.
Another option is the Ark Space Exploration and Innovation ETF (exchange traded fund) of Cathie Wood, an American executive who is quickly becoming a celebrity.
She likens space to the development of the Internet in the 1990s that changed life on Earth, saying, “Space technology has advanced and costs have fallen so much that the commercial race is on.”
Wood’s recent decision to sell the fund’s stake in Virgin Galactic (in which Branson will retain a 24 percent stake) attracted a lot of publicity. Much attention is also likely to be given to two holdings in the recently launched Seraphim Space, a UK investment trust.
These are: Arqit, a pioneering British quantum computing encryption company that aims to launch two satellites by 2023 to combat system hacking, and Spire Global, the global weather forecaster. Both are planning to make their US stock market debut after merging with special acquisition companies (Spacs). The response to these IPOs could be a test of space sentiment.
Does the sector have infinite potential? Or is it overhyped?
Vision: Jeff Bezos
Seraphim, which was oversubscribed at launch, now has a 7 percent premium to the net worth of its largely unlisted assets.
It seems that investors are eager to support companies like the Reading-based Altitude Angel, whose systems should allow the use of fully autonomous drones in global airspace. However, Burgeman thinks the trust’s promise of an annual return of more than 20 percent is exaggerated.
David Coombs of Rathbone Investment Management is wary of the buzz in the space race. He argues, “Anyone interested should remember that, just like in the Gold Rush, the way to make money was to invest in picks and shovels.”
This suggests long-established aerospace groups such as Raytheon Technologies with its space division. Of course, the decision to go into space may already have been made for you if you own certain Baillie Gifford trusts. Edinburgh Worldwide, US Growth and Scottish Mortgage (where I am an investor) own interests in the privately held SpaceX. Edinburgh Worldwide also has Spire Global. Without knowing it, you may have already crossed the last line.
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