Wednesday, August 10, 2022
News for Independent BusinessSpace - The Final Financial Frontier

Space – The Final Financial Frontier

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It is no secret that Captain Jeff Bezos and the Starship Amazon have their sites set beyond the metaphysical world. The allure of the infinity of space and the expansionary economic vision is too rich to ignore. The titans of industry like Bezos, Musk and others have taken the lead by launching satellites into space at a size and price-point that derives economic benefit. The heavens are no longer the sole domain of governments.

The space sector appears to be no different from others, meaning that the private sector is incentivized to go stronger and faster at space than ever before. The plethora of information beamed back to earth is profitable across a wide-ranging spectrum, monetizing data and distributing it to everyone from government to commodities traders. So your first question might be, how can I profit from space.

Before we as individual investors get too excited, let’s take a look at how the professionals are leveraging space exploration. Commercial space ventures have received more than $18.4 billion of investment since 2000, according to the Start-Up Space 2018 report from research firm Bryce Space and Technology. As the chart depicts above, what was originally a government sponsored sector, is now becoming the target of venture capital. VC investment accounted for over 40% of total investment in 2017, up from 12% the year prior.

As one might expect, safety is a huge concern, when transferring the risk from public to private enterprise. Since the inception of space travel, 18 astronauts have died. While it is almost certain that these private companies transporting civilians into space will request “no-liability” documents from travelers, a death or deaths would obviously be deleterious to the industry. In addition to personal safety, there is the risk of losing very expensive equipment.

Satellites on average run about $500 million each. Will there be an extraterrestrial version of Greenpeace using laser beams to scare off humans littering the ethos? There is a risk in the commercialization of the heavens. It comes in the form of space debris, items left floating in orbit after a rocket launch or a satellite failure. The U.S. military tracks more than 24,000 manmade objects, ranging in size from tiny to 10 tons or more, orbiting the Earth. A 0.4-inch item of debris traveling at 25,000 miles per hour can knock out a satellite. That would be tough on a company’s bottom line.

Getting back to you, the individual investor, trying to navigate and possibly enter the space sector to diversify your portfolio. While SpaceX and Blue Origin grab headlines, it’s the thousands of publicly traded companies in the private space industry that are killing it. According to Kensho Research, “Publicly held companies in private space exploration have outperformed companies in the broader aerospace and defense community by 6 percent year-to-date.” Impressive.

However, one must have patience with this type of investment, and hope that the government and venture capitalists continue to pump money into this sector. Civilian space travel is the sexy marketing pitch, but will not sustain the industry. The profitability of space exploration is measured by the advance in the knowledge acquired in space, new discoveries about the universe that strengthen science, motivate the development of technology and promise the conquest of unknown places in the universe.

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