The SpaceX rocket successfully ferried four astronauts on its Crew Dragon capsule to the International Space Station on November 15, marking a new era for the space industry and the companies competing in it. The Falcon Heavy (another SpaceX rocket) will ferry components for the new Lunar Gateway project. This space station will serve as the staging point for both robotic and crewed exploration of the lunar south pole and the proposed staging point for NASA’s Deep Space Transport concept to Mars.
The Space Economy is a genuine sector with new and exciting investment dimensions emerging. Goldman Sachs has predicted that the Space Economy will become a “multi-trillion-dollar market” in the coming decades.
Current investible companies range from large defence contractors with aerospace subsidiaries to specialized producers of satellites, robotics and communication systems, earth imaging, satellite operators and a mix of smaller companies offering data analytics, telemetry and software services.
While there still lacks a universal (pardon the pun) definition of what the Space Economy is, the Organisation for Economic Co-operation and Development defines it as “activities and the use of resources that create and provide value and benefits to human beings in the course of exploring, understanding, managing and utilizing space.”
At Vulcan, we have reviewed and assessed many businesses operating in the Space Economy. To facilitate classification and characterization, we have isolated the following segments.
- Spaceflight/Launchers and Space Exploration
(Blue Origin, Boeing, IHI Corporation, Lockheed Martin, Mitsubishi Industries, NanoRacks, Rocket Lab, Sierra Nevada, SpaceX, Virgin Galactic)
2. National Security
(BAE Systems, Ball Aerospace, Boeing, L3Harris, Leidos, Lockheed Martin, Raytheon, Sierra Nevada Corporation, Textron)
3. Propulsion and Power
(Aerojet Rocketdyne, BAE Systems, Boeing, General Dynamics, Raytheon, Thales)
4. Satellite & Space Components Manufacturer
(Bigelow Aerospace, Boeing, Ball Aerospace, C-Com Satellite, Constellium, Honeywell, Lockheed Martin, Maxar, Mitsubishi Industries, Mynaric, Northrop Grumman, Raytheon, Thales)
5. Satellite Communication & Operators
(AT&T, Dish Network, EchoStar, Globalstar, Intelsat, Iridium, Loral Space, Gilat Satellite, Orbcomm, Sirius XM, Thales, ViaSat)
6. Project Management, Firmware, and Control Systems
(Atlassian, General Dynamics, Kinaxis, Leidos, Jacobs Engineering, Palantir)
7. Earth Surveillance/Imaging, Planetary Data Collection and Analytics
(Garmin, Hawkeye 360, Leonardo Space, Maxar, Spire Global, Trimble)
Many of the companies operating in these sectors have operations that overlap the government (civil and military) and the commercial space sector. Accordingly, there are very few public Space Economy pure “plays.” Investors looking for exposure may have to consider investing in conglomerates or specialized defence and military contractors with both terrestrial and space business segments.
Most defence and space exploration contractors have order backlogs/projects quantified as multiple years of future production or future work. A majority of these projects or developments are awarded at cost plus a fixed margin; thus ensuring steady operating cash flows.
Technology, miniaturization, geo-political tensions, public-private partnerships, and access to inexpensive capital are the driving force for this explosive new business segment. Other motivators will arise as more businesses find profitable niches and endeavours. There is growing recognition that investments in R&D on space technologies drive future innovations on earth and in second derivative businesses. At Vulcan, we have identified many growing, profitable and undervalued businesses operating in the space economy. The emergence of this exciting new economy has been an excellent opportunity for us to apply our strong ability to assess promising sectors and isolate the undervalued from the hype. If you are interested in learning more about our process, you can read about our investment philosophy here.