Being an astronaut in space was a dream for many children, and the world is closer to achieving this fantasy than ever before.
Despite the frigid temperature of -455°F in space, the sector couldn’t be hotter.
In a previously unimaginable occurrence, space flight has become more and more mainstream. Celebrity entrepreneurs (or entrepreneurs turned celebrity) such as Jeff Bezos and Elon Musk have been increasingly testing human flights into space for Blue Origin and SpaceX, their respective space exploration companies.
Richard Brandon of Virgin Galactic not only incepted his own space company, but he also took it public on the New York Stock Exchange (NYSE) via a special purpose acquisition company (SPAC) merger with Social Capital Hedosophia ($IPOA) under the ticker $SPCE.
So, as billionaires are casually checking off space flight from their bucket lists all while capitalizing on their exploration companies in the public markets, what do they know that we don’t?
It is time to take a deep dive into what space companies are all about.
TABLE OF CONTENTS
| 1. | WHAT IS THE SPACE SECTOR? |
| 2.
|
THE GLOBAL CAPACITY FOR SCIENTIFIC AND
TECHNOLOGICAL INNOVATION HAS NEVER BEEN GREATER |
| 2.1 SPACE COMMERCIALIZATION AND HUMAN FLIGHT | |
| 2.2 MANUFACTURING AND DATA | |
| 2.3 SATELLITE INTERNET | |
| 3. | GROWING PUBLIC SECTOR INTEREST |
| 4. | TO INFINITY AND BEYOND – THE GLOBAL SPACE ECONOMY |
| 5. | THE ULTIMATE ESG INVESTING PLAY? |
1. WHAT IS THE SPACE SECTOR?
This begs the question: Why are so many investors amped up about the space sector?
Since the 1960’s and 1970’s, dubbed the “Apollo era”, we haven’t seen this much focus and headway in the sector.
Richard Branson and Jeff Bezos made headlines this year when they each participated in their own companies’ missions into the atmosphere.
Elon Musk, who’s 19-year-old space company SpaceX recently finished its first civilian flight, has been working on making reusable rockets, a concept previously untouched.
In true market fashion, a large premise fueling the massive demand for space investment is “fear of missing out,” or as the kids like to call it these days, “FOMO.”
With hordes of investors wanting to be early to the game, an industry as speculative yet potentially lucrative as space is the perfect sector in which retail and institutional investors wish to make asymmetric bets. When it comes to funding, this provides great momentum for space companies.
Although the risk is paramount, as many companies are just one rocket explosion away from catastrophe, there are still hundreds of millions of dollars being poured into this sector that was previously deemed “too risky.”
Investment into the commercial space sector can help create “a second golden age for space,” according to General John Raymond, Chief of Space Operations for the U.S. Space Force. The industry itself is exploding in a way that is not unlike the early days of the internet boom.
2. THE GLOBAL CAPACITY FOR SCIENTIFIC AND TECHNOLOGICAL INNOVATION HAS NEVER BEEN GREATER
Space has benefitted us as a society and economy for several decades now, and it has no plans to slow down. Satellite telecommunications, advancements in weather forecasting, and global positioning have all come about from studies stemming from the first satellites launched from earth.
Many other sectors, such as resources, will look to partner with those in the space sector for joint research and development. Locating a further supply of precious metals that are in high demand on earth is one of the many possibilities how space can vastly contribute to today’s economy. Materials, energy, power generation; these are all areas that can benefit from space exploration.
Future ambitions within the sector include establishing sustained access to the planet Mars, the moon, and asteroids. These goals would require the advanced use of humankind and robotic systems to fully reap the benefits that these accomplishments would bring to us on earth.
The benefits can be broken up into three categories. Innovation, Culture, and Inspiration.
Innovation is top-of-mind for most space exploration businesses as the common foundation of companies dedicated to this sector is to solve global challenges. If space innovation prevails, it would in turn benefit the sector with great economic relevance, giving it the fuel needed to continue opening new domains of science and human technological advancement.
When you have an industry such as space that has the potential to enhance our current methods of recycling, health/medicine, transportation, robotics, computing, and software, it creates a vast wave of excitement amongst young people, encouraging more of them to take on careers in the fields of science, technology, mathematics, and engineering.
A few main innovations which space exploration contributed to are:
- Solar panels
- Implantable heart monitors
- Cancer therapy
- Light-weight materials
- Water-purification systems
- Improved computing systems
- Global search-and-rescue systems
Regarding culture and inspiration, we need to remember that humans have always pondered our existence and questioned our place in the universe. Every minuscule aspect of space we learn about helps scratch the curious itch that we all have as a species.
The uniqueness of space exploration is unlike any other industry. The challenges it faces are unparalleled, as are its rewards.
Bolstering our ability to defend our planet against any type of catastrophic event, improving our space debris removal process for the safety of our space aircrafts, and advancing research on weather are a few of the god-like achievements that we’ve witness in our lifetime.
The first 5 decades of exploration have brought on many advances for us as a society; some intentional, and some merely a by-product of the research. One can only imagine the possibilities that lie in the next few decades, especially with increasing sentiment that space is the new reality.
2.1. SPACE COMMERCIALIZATION AND HUMAN FLIGHT
Some years ago, if you had told us there would be an industry for space tourism, we would have asked you what movie you were referring to.
Now in the year 2021, and companies like Elon Musk’s SpaceX, Jeff Bezos’ Blue Origin, and Richard Branson’s Virgin Galactic ($SPCE) are competing to lead this emerging market that aims to be able to take ordinary citizens to space and back. Just for fun.
Space tourism, according to a report by Wall Street firm UBS, can reach a potential market value of US$4 billion in 2030, including orbital and suborbital flights. However, Northern Sky Research, a space industry consultancy, touted that the suborbital market can reach US$2.8 billion in market value by 2028, with US$10.4 billion in total revenue over the remainder of the decade.
Their projection for orbital flights was a modest US$610 in market size by 2028, and the rest of the decade bringing in around US$3.6 billion of revenue.
Not bad for a speculative space (no pun intended).
There are two types of flights when it comes to space tourism. Orbital, and sub-orbital. This makes a significant difference to the cost, experience, and even the risk.
Orbital flights reach a speed fast enough to maintain orbit around the earth, without succumbing to gravity. The speed needed to reach the complex (and expensive) state of orbital flight is around 28,000 kilometers per hour, and the spacecraft must be distanced 200km above the earth’s surface to achieve this.
Sub-orbital flights only need about 100km of distance from the earth’s surface and travelling at a more modest speed of about 3,700 kilometers per hour, before gracefully falling back to earth with gravity once the engines are voluntarily shut off.
The three big space companies mentioned have different offerings and are at different stages of development. For example, the trip with SpaceX is 200x the price of a flight with Mr. Branson’s rocket, as the SpaceX space trip lasts significantly longer.
Virgin Galactic and Blue Origin are currently competing in the world of suborbital tourism. Both their systems are powered by rockets, and they are capable of holding 6 passengers.
However, there are differences between the two.
Virgin’s spacecraft is called SpaceShipTwo, and its jet-powered carrier aircraft is dubbed WhiteKnightTwo. The spacecraft is set free from its carrier around 40,000 feet of altitude, where it goes into a brief freefall. From there, the rocket motor is ignited, and the spacecraft shoots up to a dizzying altitude of 295,000 feet (roughly 90 kilometers).
Passengers receive a few minutes of microgravity, as the craft slowly maneuvers its way to the edge of space before descending back to its runway in New Mexico. Virgin’s spacecraft is reused with a new hybrid rocket engine before connecting back to its carrier aircraft.
Mr. Bezos’s Blue Origin is more of a traditional rocket. The spacecraft launches with a domed capsule and ascends directly upwards, separating from its capsule about 330,000 feet up from the earth’s surface. A few minutes floating in microgravity is enjoyed (or not) by passengers before a complex system of parachutes descents it down to the West Texas desert floor. Bezos has currently pre-sold $100 million worth of tickets to ride the rocket into space.
In an occurrence that many would only dream of, Blue Origin has officially scheduled to launch William Shatner (aka Captain Kirk) into space. The Canadian actor will be flying out on October 12th on the New Shepard, joining the likes of Audrey Powers, Blue Origin’s VP of mission and flight operations.
At 90 years old, Shatner will be the oldest human to fly into the atmosphere. The marketing value of such an event will likely do wonders for the promotion of Blue Origin. Star Trek die-hard fans, rejoice!
In true Elon fashion, SpaceX’s most recent flight, called Inspiration4, was a first of its kind. In an orbital flight carrying four passengers, The SpaceX “Crew Dragon” spacecraft shot almost 1.9 million feet, or 575km (about the length of New York State) away from the earth’s surface, orbiting the earth for 3 days at a rate of 15 laps a day. The flight landed safely over the Atlantic Ocean in a designated landing pad.
Inspiration4 mission completed several historic firsts:
- First all-civilian human spaceflight to orbit,
- First black female spacecraft pilot,
- Youngest American in space,
- First person to fly to space with a prosthetic,
- Farthest flight for a human spaceflight since the Hubble missions,
- First time SpaceX has operated three Dragons in space,
- First free-flight of a Dragon spacecraft on a human spaceflight mission,
- Largest contiguous window ever flown in space,
- First splashdown of a Dragon crew in the Atlantic Ocean, and
- First thrice-flown Falcon 9 booster to launch a human spaceflight mission.
That sounds like one hell of a weekend.
2.2. MANUFACTURING AND DATA
Satellite manufacturing still plays a key role when it comes to accelerating media, global technology, and communication industries.
However, even though high-quality video, digital content, and super-fast broadband networks have been superior the last 5 decades or so, Fortune Business Insights conducted a study that shows the market for satellite manufacturing and launch systems would see exponential growth by 2028, thanks to the ever-growing investment in research and development activities happening all over, (and just outside of) the earth.
As the satellites used today often require parts that have highly unique curves and cavities, manufacturers are calling on 3D printing companies more than ever. Multi-functioning, one-of-a-kind, complex parts manufactured in smaller quantities are where 3D printing becomes the most useful.
This is likely why Thales Group ($HO) was included in Ark’s Space Exploration & Innovation ETF ($ARKX).
Even during the pandemic, when most of us were locked down at home, satellite images helped reveal how fire ecology, water quality, air pollution, precipitation, and other climate change-related factors were affected by the pandemic; further escalating the relevance of the satellite industry.
According to Fortune Business Insights, here are the top 10 key players in the global market for Satellite Manufacturing and Launch systems:
- Airbus S.A.S.
- ArianeGroup SAS
- The Boeing Company
- GeoOptics, Inc
- ISIS – Innovative Solutions In Space B.V.
- JSC Academican M.F. Reshetnev
- Lockheed Martin Corporation
- Maxar Technologies
- SpaceX
- Viasat Inc.
Satellites are typically manufactured using Kevlar-style materials, which do not melt until reaching extremely hot temperatures:
- Carbon fiber – its physical properties give it a high resistance to any opposing force
- Titanium – high strength against the effects of oxidation
- Aluminum – recyclable and lightweight
Scientists are currently working on satellites that integrate 3D printing in space to literally repair themselves. In space.
Andrew Rush, CEO of Made In Space says this technology is likely 1-2 decades away. Rush’s autonomous construction platform Archinaut has completed testing recently. Their test chambers aim to simulate the vacuum that is space, so that the company can start trying to build antennas, solar arrays, and other similar components on newly launched satellites.
These ambitions do not come without challenges, as every pound of storage in space is crucial. Reducing mass is the key and having extra materials such as 3D printers onboard needs to be strategically implemented.
“This is really transformational, because everything we’ve sent to space we fold up and blast it into space. We have to design it unfurl itself perfectly and survive the rigors of launch,” Rush said.
2.3. SATELLITE INTERNET
One of the biggest industries to target when it comes to the space industry is satellite internet.
Rather than ushering internet signals through physical electrical cables, satellite internet moves information through space, quite literally. This sends out signals at a rate 47% faster than fibre optic cable. This type of technology can prove to be especially helpful for improving the infrastructure of the internet in rural areas, where access continues to be a challenge.
The Satellite communication (SATCOM) market was valued at US$66.63 billion last year. By 2028, it is expected to be worth US$128.2 billion, which represents a 9.8% compounded annual growth rate (CAGR).
In case you were wondering if anyone has hopped on the satellite internet train when it comes to space, they have.
A subdivision of SpaceX, Starlink currently holds over 1,350 satellites in orbit. The business model for Starlink is cutting out the middleman (telecommunications companies) and linking users directly to the satellites.
The company aims to send up to 42,000 more satellites into the earth’s orbit by 2027. Elon loves to create the most complex and innovative ideas while making them simple as possible to users, and Starlink is no exception.
If Starlink is running in your area, you can sign up to the company from their website and receive an email to purchase the Starlink kit. Once your purchase is complete, you get sent a tripod, WiFi router and a terminal to set up all by yourself.
The kits cost US$499, with a $99/month subscription fee with speeds up to 210 megabits per second. US$99 preorders may be available for consumers in areas of the world in which Starlink is not yet available.
Did you know? Starlink inevitably brought out some competitive tendencies from other internet service providers within the U.S.. Although Starlink was approved by the Rural Digital Opportunity Fund to receive US$885.5 million over the next 10 years to connect 642,925 sites across 35 states; local internet service providers are asking the Federal Communications Commission (FCC) to review their eligibility on the grounds of “unproven technology.”
Elon’s peer celebrity billionaire Jeff Bezos could not just sit on the sidelines. Project Kuiper, an Amazon subsidiary revealed via government filings that they would proceed to build a global space-based internet service. Project Kuiper is looking to launch 3,236 satellites into orbit at an altitude of 630 kilometers; not too far from Starlink’s satellites which hover around the 550-kilometer altitude level.
The FCC has granted Project Kuiper the regulatory approval needed to launch its fleet into space by 2029, connecting with antennas on earth to create a global internet service.
While competition between local internet service providers and satellite internet companies is already brewing, we can imagine there will be a fight for satellites in space between the emerging companies that will inevitably penetrate this market.
3. GROWING PUBLIC SECTOR INTEREST
If there is anyone outside of the 3 big billionaires who would get themselves involved in the mysterious world that is space investment, it would be Cathie Wood.
Cathie Wood’s ARK Space Exploration & Innovation ETF ($ARKX) has carved out the speculative niche of space exploration within the public markets as a one-stop shop for those wanting to get their hands on un-earthly investment opportunities.
While Cathie did partake in the phenomena that was $SPCE by buying 672,000 shares worth, the famed innovation-driven tech investor had her own agenda. Once she offloaded her entire position, her fund still held positions in 13 other companies that were deemed relevant to the space by Wood herself.
$ARKX’s holdings portfolio consists of the following:
Trimble Inc. ($TRMB) – 9.82%
3D Printing ETF ($PRNT) – 7.44%
Kratos Defense & Security Solutions, Inc. ($KTSO) – 6.14%
L3Harris Technologies Inc. ($LHX) – 5.53%
Iridium Communications Inc. ($IRDM) – 5.37%
Lockheed Martin Corporation ($LMT) – 5.24%
Unity Software Inc. ($U) – 5.02%
Komatsu Ltd. ($6301) – 4.49%
JD Logistics ($2618) – 3.98%
Thales SA ($HO) – 3.84%
Dassault Systemes SA ($DSY) – 3.15%
Blade Air Mobility, Inc. Class A ($BLDE) – 3.05%
UiPath Inc Class A ($PATH) – 2.94%
AeroVironment, Inc. ($AVAV) – 2.86%
Amazon.com, Inc. ($AMZN) – 2.82%
Cathie Wood has deemed the above companies viable to be included in the holdings of ARK’s space ETF, which indicates that the public sector is more integrated into the space sector than one may initially think.
4. TO INFINITY AND BEYOND – THE GLOBAL SPACE ECONOMY
Morgan Stanley estimated the current global space economy, which sits at a value of approximately US$350 billion will exceed US$1 trillion by 2040.
Without a doubt, the most near-term opportunities lie in satellite internet access, which is proving to become more cost-efficient just as the data sees a significant drive in demand. Morgan Stanley predicts that at least 50% of the projected growth of the global space economy will be from launching satellites that offer broadband Internet service.
“The demand for data is growing at an exponential rate, while the cost of access to space (and, by extension, data) is falling by orders of magnitude,” says Adam Jonas, Equity Analyst at Morgan Stanley. “We believe the largest opportunity comes from providing Internet access to under-and unserved parts of the world, but there also is going to be increased demand for bandwidth from autonomous cars, the Internet of things, artificial intelligence, virtual reality, and video.”
Data demand keeps going up and autonomous vehicles are largely to thank for that. As far as the cost and affordability for wireless data, Morgan Stanley estimates it may sink as low as 1% of today’s levels, which is a sure-fire sign for there to be loads of competition as this sector reaches its teenage years.
Reusable rockets are helping reduce overall costs of launching satellites. Today, the cost to launch one of these is US$60 million – less than a third of what it costed at the beginning. With satellite mass production expected to come into play, we could see satellite production costs sinking as low as less than US$1 million per satellite.
Tumbling costs and growing demand are huge indicators that this industry is starting to catapult into a new global phenomenon.
The ample opportunity in this sector does not stop at satellite broadband internet. Areas that could potentially be greatly enhanced by space exploration are:
- Postal services – Packages currently delivered by airplane or truck could be transported more efficiently via rocket,
- Private space travel can become commercially available, and
- Mining equipment can be sent to asteroids to mine for minerals.
While the past is riddled with tales of caution regarding once farfetched ideas such as space travel, the landscape today is a lot different. Near-term themes previously mentioned are more actionable and have a real word impact.
Not to mention the fact that large public and private firms are deploying many initiatives that indicates a growing interest and significant potential in the sector. The global space industry can capitalize on opportunities and address vulnerabilities in areas such as:
- Surveillance,
- Mission deployment,
- Cybersecurity, and
- Artificial intelligence.
5. THE ULTIMATE ESG INVESTING PLAY?
Climate change targets are a huge aspect of satellite technology, which is part of the reason space has a giant role to play in the environmental side of ESG.
“Nature will be on the balance sheet, which means space will be on the balance sheet because you can’t see ESG without us,” said Andrew Zolli, vice president of impact initiatives for U.S. satellite imagery operator Planet.
Measuring is the key to managing when it comes to ESG reporting, and remote sensing is a highly scalable and low-friction data source which allows businesses to shed light on their climate and decarbonization efforts.
Now that we’re talking about how we can monitor environmental friendliness from space, let us talk about what is being done currently.
The investor ESG software market was valued at US$489.15 million in 2020 and is projected to reach US$1,496.31 million by 2028; it is expected to grow at a CAGR of 15% during 2020-2028. The growth of the investor ESG software market is attributed to the increasing government initiatives to promote ESG investment, which is a huge part of the increasing amount of investment dollars into space-related businesses.
GHGSat, hailing from Canada, monitors greenhouse gas emissions from industrial facilities around the globe, all using satellites. Their approach is different from large agencies such as the National Aeronautics & Space Administration (NASA) and the European Space Agency (ESA).
While the larger entities monitor gas emissions for data to report to global climate change models, GHGSat zooms in closely and tracks individual facilities. Emission generators, regulators, and market analysts are the recipients of this space-retrieved data.
This intelligence not only monitors high emission offenders, but scopes out the facilities with outstanding emission rates and collects data to help progress the global ESG incentives that are becoming increasingly prevalent.
ESG reporting is on the rise. Clients of companies such as GHGSat even want to know about the emission activity of their suppliers. Consumer-facing companies are now able to analyze their suppliers and choose based on their environmental responsibility which in-turn, improves their ESG compliance.
“We’ve done some exploratory discussions with several large … consumer-facing customers, and they have a clear interest in understanding the greenhouse gas intensity of their supply chains,” Germain added.
Did you know? Paris-based Kayrros, a data analytics company has developed a global methane monitoring platform that combines input from several satellites to continuously track methane emissions, measure them, and attribute them to their source down to the facility level.
Companies today like Spire Global, a U.S.-based space data and analytics provider, are even forecasting weather patterns to plot more efficient transport routes to save fuel costs. This helps companies meet the emission standards for sea transport set by the International Marine Organization (IMO), who are continuously tightening their requirements.
“And again, you cannot do an interplay on a global scale without truly global data — and that means satellites.” – Peter Platzer, CEO of Spire Global
On the social aspect of ESG, combining space-retrieved data with data from the ground can help analytics companies determine how people are being treated; satellites can help gain insights on issues such as illegal fishing, slavery, and human trafficking.
IN CONCLUSION
Overall, the global space economy supports a plethora of businesses, industries, and initiatives.
Commercializing space travel and space tourism barely scratches the surface.
The ability to connect millions of internet users via satellites in the sky, in an industry where the cost is dwindling as quickly as the demand is surging, is destined to be a huge value-add for earth’s citizens; not to mention the improvement this would bring to rural communities.
Enabling companies to not only effectively monitor their own ESG compliance, but also of their partners and suppliers, brings accountability across the world to businesses in support of the ongoing ESG initiatives we are seeing start to dominate the industry.
Furthermore, if resources become available and accessible to us from outer space sources, such as from asteroids, this can be groundbreaking for all from the workers who drill at mines, to the bankers financing mining companies; and ultimately consumers themselves.
Perhaps the most in-demand commodity throughout all of this is human capital. NASA or a government agency were your only choices if you were a young engineer who pursued an interest in space. Today, you’ll likely have trouble choosing which space-related opportunity you would like to take on as a career.
“In my conversations, I’m finding that Millennials and Generation Z are focused on two big areas: climate change and space – and there is even some crossover between the two areas,” explains Ashley Macniell, co-head of Technology Equity Capital Markets at Morgan Stanley. “But the passion of these two generations is what’s going to keep interest in space going over the next several decades.”
Humanity seems to be working from the outside in to help keep our planet’s bill of health clean. Do you think we are headed in the right direction?