In today’s Exponential Investor:
- Why space has substance
- What is space used for?
- How to invest in space
Jeff Bezos, Richard Branson and Elon Musk grab most of the space headlines these days.
Each has founded his own space company – with Blue Origin, Virgin Galactic and SpaceX, respectively – as they try to dominate the modern-day space race.
And there’s no doubt that their high-profile endeavours have heightened curiosity toward space generally.
But does space really have substance, or is it just a billionaire’s ego trip?
Well, the signs are that it could be the former.
A trillion-dollar industry
In 2021, the global space economy grew 9% on the previous year. It sounds pretty modest, but this was its largest annual growth since 2014.
According to Morgan Stanley, the space industry is expected to reach $1 trillion by 2040, up from around $350 billion today.
The industry is largely dominated by satellites, and the rockets used to launch them. Satellites make up around 70% of the space economy.
What many of us earthlings don’t realise is just how important space is to our daily lives.
Satellites are the reason we can plug directions into our smartphones so that we don’t get lost, through the use of GPS.
They’re also why we can watch the weather forecast, and plan our attire accordingly.
More recently, satellites have been playing a greater role in defence and security systems. As you’ll see below, one way in which they do this is by storing specialised data, helping to mitigate against cyber-attacks.
Another way is by coordinating video and voice communications with aircraft and ground vehicles.
In fact, they’ve been used to great effect by Ukranian forces in its ongoing conflict with Russia, with views from above helping plot their next strategic moves.
There’s also the commercial aspect of space to consider, too.
The abovementioned business tycoons are seeking to kickstart an era of space tourism ‒ something that hasn’t been available up until now.
For example, Virgin Galactic is conducting commercial passenger trips to space, its most recent taking place on 11 July.
These don’t come cheap, however, with the cost of a ticket at $450,000 per seat.
SpaceX launched three passengers in April 2022 for $55 million each.
Collectively, there are many tailwinds fueling the growth of the space industry ‒ the satellites, the launch infrastructure, communications, potential for cybersecurity, and now commercial space travel possibilities.
Crucially, the cost of reaching space is starting to drop significantly, too.
An increasingly competitive landscape has led to significant innovations. For example, satellites can now be dispatched in flexible locations across the world rather than a spaceport, and the growing adoption of micro-sized satellites has made space launches less costly.
According to CNBC, launch costs are expected to be around 15 times lower than today by 2040, helping to explain why growth in the space industry is accelerating.
The UK has lift-off…
The space industry is also becoming a point of focus for the UK government, which announced its first ever space strategy last year.
Under the terms, it is seeking to build one of the “most attractive space economies in the world” and will allocate more than £6 billion to developing space technologies over the next decade.
Given that the UK’s market share of the global industry is only 5%, it has a long way to go to achieve this.
However, it’s on the verge of reaching a major space milestone since, as we speak, the UK is preparing for its first satellite launch from UK soil.
Within the next few weeks, Virgin Orbit’s LauncherOne rocket will launch payloads from the Ministry of Defence and from countries such as Oman and Poland. The launch is taking place at Spaceport Cornwall in Newquay.
How to invest in the space sector
We admit that the space industry is at a nascent stage in terms of commercialisation, and it still has a lot to answer for in terms of safety, cost and viability.
Although interest is certainly growing, publicly listed space companies are still at a premium. Even some larger players, such as SpaceX, aren’t publicly listed.
However, there are still ways to gain exposure to the space trend.
In the UK, one of the few ways to ride the space trend is through the Procure Space UCITS ETF, which made history when it was introduced on the London Stock Exchange last year, becoming the first space-focused ETF to launch in Europe.
Being an ETF, it isn’t a typical stock investment, but tracks an index underpinned by a basket of space-centric companies.
You can view the list of constituents here.
The largest holding is satellite communications company Globalstar.
Another space company to watch out for is Arqit Quantum.
This company is leading the way for space-based cybersecurity. Arqit uses quantum encryption to store and protect sensitive data using photons. It currently has commercial ties with the UK’s Ministry of Defence.
Finally, Rocket Lab is a provider of launch services and a developer of satellite components.
Only last week, the company successfully completed its 32nd mission, launching payloads for the Swedish National Space Agency.
Its rocket launcher system, known as Electron, is the second most frequently launched rocket in the United States.
So, strap yourselves in – the space industry could be about to have lift-off.
Until next time,
Contributing Editor, Exponential Investor