It’s time to expand your investment horizon, well beyond the horizon

The commercial space race is hotting up. And not just in terms of physics. The billionaires bringing us the galaxy are trading insults too.

Just check out this headline on Bloomberg: “Bezos Is ‘Years Behind’ Musk in Satellite Race, SpaceX COO Says”. Take that!

Meanwhile, The Financial Times is reporting on recent financial developments in the space race: “Sir Richard Branson’s Virgin Galactic made its trading debut on Monday, becoming the first space tourism company to launch on to public markets.”

How did the first day’s trading go?

Virgin Galactic stock — traded under the ticker SPCE — ended the day flat at $11.75 after initially surging 10 per cent in morning trading in New York as investors showed support for Sir Richard’s vision to send wealthy tourists into space.

Bloomberg also published a video which claimed that the world’s first trillionaire will be an asteroid miner.

Which billionaire do you think will hit the trillion mark first? The space tourism provider? The rocket launcher? The satellite provider? The asteroid miner?

I think the commercial space pioneers will make the same mistake as their historical counterparts. Selling shovels and pints to miners during gold rushes is a better strategy than getting your hands dirty. And there’s no shortage of that sort of opportunity in the space race.

The reason is simple. Mining an asteroid isn’t quite like dusting crops. Consider a simple problem: How do you mine an asteroid?

The problem being a lack of gravity. Any attempt to drill or dig at an asteroid will simply send your mining gear spinning or flying.

A long list of companies is coming up with innovative solutions. Like swallowing small asteroids whole and then mining them from all sides. Or using solar powered lasers.

The point I’m making is that the types of problems facing asteroid mining are fairly new and unique. A heck of a lot of innovation is set to happen. And anyone with leading solutions will have a rather epic business proposition. All space companies will want their products and services.

The amount of wealth and resources floating around in space is vast. But competition in the industry could wreck profits quickly. The key to making money as a speculator is finding the companies that space pioneers will all be relying on.

But is space really so easily commercialised?

It already has been. The commercial infrastructure is already at play. For a surprising reason. NASA recently began backing the secret strategy which gives America its competitive edge in so many other arenas. It’s called the profit motive.

The American model is simple. Bid a price for resources in space. And let private companies compete to sell it to you, up there. May the best company win…

United Launch Alliance has published a set of prices it is willing to pay anyone who can get certain resources into space. $3,000 per kilogram for propellant in low Earth orbit and $500 per kilogram on the surface of the moon, according to Space.com.

A Japanese man called Masatoshi Nagasaki has styled himself as the first space trader. He brokers deals between companies that can get your gear into space and companies that want to get their gear up there. And he’s been quite successful so far.

The point is, space is already a booming industry. And the vast wealth it will create is effectively guaranteed.

The question is how you should invest to profit. Who will get the benefits of the boom?

For now, it’s rather hard to invest at all. Major multinational and diversified companies dominate the industry. And small private companies are the innovators.

But the whole point of financial markets is that they allow you to raise capital – something space exploration needs a lot of. If the commercial space age is about to begin, it’s likely investors will get a chance to participate.

When the opportunity opens up, don’t forget what we’ve learned from the past. Selling shovels and pints will be the real opportunity.

But how much of an opportunity?

According to a 2005 article from the New York Times, Microsoft created 10,000 millionaires by the year 2000. It offered young employees stock options. These days, most computers use Microsoft products. But the company only recently became a large computer manufacturer…

If this sort of boom repeats in the commercial space race, how many millionaires will it create? A lot.

Speaking of which, Nick O’Connor wants to create more millionaires in England. You can find out more here.

Until next time,


Nick Hubble
Editor, Southbank Investment Research

Category: Technology

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