Josh Dudick, Wealth of Geeks
At a time when new technologies are constantly emerging, one industry has got investors looking up. WAY up. All the way into space.
Enthusiasm for space has been reignited in recent years as the economic prospects and technological innovations that lie within the grasp of humanity’s final frontier come into sharper focus.
Yet, unlike America’s former struggle with the Soviet Union in the 20th century, the private sector is in the driver’s seat of this new space race. With billionaire entrepreneurs, including Elon Musk, Jeff Bezos, and Richard Branson, all aiming for the stars, the prospects for pushing humanity’s boundaries deeper into space are opening up.
“As a former engineer at SpaceX, Firefly Aerospace, and Axiom Space, I think the space industry is a ripe market to invest,” says David Sandhu, founder of Brighter Wealth. “The sky is the limit when it comes to growth potential for space firms.”
What are some of the biggest bets on space companies? Here’s advice from financial experts on how to factor this unique sector into your investment plan.
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New frontiers
The vast space industry involves everything from asteroid mining to tourism, defense to telecommunications, and climate science. Some analysts predict space (including public and private spheres) will be a trillion-dollar industry by 2040.
While many new ventures are launching, several big names currently stand out as the titans of the private space race over the past decade.
Elon Musk’s SpaceX, an industry leader that aims for the human colonization of Mars, is now readying for the launch of Starship — its biggest launch ever. Yet takeoff remains pending after the launch was delayed at its southern Texas facility in the final minutes to countdown on April 17.
If it ever gets off the ground, a fully-fledged mission to Mars will likely be decades away, but SpaceX has other revenue from other business lines. It also provides global internet coverage through its Starlink program and is a defense contractor to the US government.
SpaceX remains one of the largest private companies globally, with valuations ranging roughly between $100 - $150 billion, limiting options for cashing in unless Musk takes the company public. In the meantime, it is only possible to purchase equity from those holding a private stake in the venture.
Amazon CEO Jeff Bezos also has his own space venture, Blue Origin. Currently, the company focuses on harnessing reusable rockets to enable suborbital space tourism and research, although, like SpaceX, Bezos also has his sights set on Lunar and planetary missions. Investors will have to wait a while longer to invest in Blue Origin as the firm has yet to announce any plans to go public.
Virgin Galactic, Richard Branson’s venture, is singularly focused on space tourism. His excursions beyond the stratosphere are tailored to give the ultra-wealthy a once-in-a-lifetime, out-of-this-world experience. Yet reality has fallen flat of that lofty vision. First billed to be available in 2007, space-bound commercial flights have seen over a decade of delays.
Branson hopes to have flights available by the end of this year, but some are growing impatient. A class action lawsuit was launched by some investors who claim the company has not been transparent about the structural weaknesses of its aircraft.
Virgin Galactic trades on the New York Stock Exchange, making it easy to access. After an eventful IPO in November 2019, the stock soared during the pandemic yet is now trading close to historic lows, trading at around the $3 range through the first quarter of 2023.
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Crash landing
There is considerable risk involved in investing too heavily in these moonshot ambitions.
“If you hold these private companies in your portfolio, either because you previously worked there and were granted shares or through private investments, you need to understand the volatile nature of the space industry,” explains Sandhu.
“While the space industry has potential for long-term growth, these companies can be affected by a few bad launches or government regulations,” he adds.
“As a financial advisor specializing in working with aerospace and space industry employees, my recommendation is to be mindful that this investment is subject to event risks,” Sandhu points out. “Diversification is key for long-term growth.”
Investors can get broad space sector exposure without putting all their moonrocks in one spacecraft.
“With the grandiose ambitions (of Musk and Branson), it’s clear that extensive research and hard work are necessary before diving into any investment opportunities,” says Jorey Bernstein, CEO of Bernstein Investment Consultants.
“Several exchange-traded and mutual funds track space-related stocks, such as the SPDR S&P Kensho Final Frontiers ETF and the Procure Space ETF. (These can) provide retail investors exposure to this industry,” he adds.
In the decades ahead, investing in the space industry has the potential for stratospheric growth as technological advances and new capital flows reignite this industry.
However, it also entails high costs, major challenges, a high barrier to entry, and the potential for volatile stock prices and setbacks in project development. Ultimately, investing in space requires a careful assessment of risk and a long-term vision to come to fruition.
