Welcome To Investing In The Commercial Space Race
One small step for man, one giant leap for… our economy?
Space travel use to be exclusively a competition between national governments. In recent years commercial space race has heated up dramatically. A direct result of the industries shift from sluggish government programs into the hands of private and public companies.
A Little History…
Braving the last frontier has long been grounds for national bragging rights. Russia burst onto the scene launching the Earth’s first artificial satellite, Sputnik I, on October 4, 1957. They shortly followed with Sputnik II.
The United States was able to launch one of its own, the Explorer I, in late January 1958. This coincided with President Eisenhower establishing NASA in 1958. He simultaneously disbanded the US’s previous space program, the National Advisory Committee for Aeronautics (NACA).
The competition heated up over the next decade as President Kennedy declared in a speech on May 25, 1961. He claimed the US would successfully land and return humans from the moon before the seventies. On July 20, 1969, Apollo 11 successfully landed its lunar module, Eagle, on the moon. Neil Armstrong and Buzz Aldrin became the first humans to step on its surface. This extraterrestrial achievement finally put an end to the first space race in our planet’s history.
But when was the commercial space industry founded?
Private companies entered the space industry in the 1960s when they began launching government and private communications satellites into orbit. More companies, like Boeing, became popular as they entered the lucrative business technology design used in NASA projects. However, it was not until more recently that private companies began taking on these projects independently.
Virgin Galactic, SpaceX, and Blue Origins are a handful of companies that have become dominate forces in the space race. Headed by celebrities Richard Branson, Tesla’s ( TSLA) Elon Musk, and Amazon’s ( AMZN) Jeff Bezos respectively. These three companies made promises to land paying customers on the moon in the next 5 years.
So who’s leading the commercial space race?
None of the aforementioned companies have successfully landed a commercial rocket on the moon. However, there seems to be a clear frontrunner: SpaceX. SpaceX has separated itself from its competitors by becoming the cost leader of the industry.
SpaceX’s differential technologies are its reusable rocket booster and single engine type. This special booster can be reused after launches. Thus allowing the company to save millions of dollars by not having to make new ones. In addition, they only need one type of engine due to their consistent use of RP1 and liquid oxygen. Most companies need to produce three different types of engines to take-off. SpaceX on the other hand can construct the same lithium-alloy engines from the same process, saving millions of dollars.
It has been calculated that for SpaceX to go from blank paper to fully-operating rocket, they spend roughly $440 million. For NASA, it ranges anywhere from $1 billion to $1.5 billion for the same process.
SpaceX’s advanced technology has allowed them to quickly fill up their trophy case in terms of space race achievements. These accomplishments include the first privately funded company to successfully orbit and recover a spacecraft. Along with the first privately-funded company to send a spacecraft to the International Space Station.
How close are we to space tourism?
SpaceX has made major strides in terms of its rockets. The company has spent most of its time shuttling astronauts and cargo to the international space station aiming to land on Mars by 2022. Virgin Galactic, Blue Origins, and several other companies have focused more exclusively on the commercial space tourism aspect of the industry.
In 2004, the SpaceShipOne, designed by Burt Rutan, became the first privately-funded rocket to carry humans into suborbital flight.
Virgin Galactic has made several promises to take humans to the moon, initially aiming for 2011. However, he still vows to land there in the next year or so. The cost per person is around $200,000 for the entire trip, reportedly 1000 people have signed up. With so many delays, Branson has said that he will stop giving potential launch dates until plans are more solidified.
Blue Origins, led by Jeff Bezos, has plans to take paying customers into space by April 2019. Musk recently announced he plans to fly two customers around the moon this year. However, delays and pushbacks seem to be commonplace in this industry, so, for now, we’ll just have to sit tight.
But how exactly will the commercial space race affect our investments? Let’s take a deeper look as we inch closer to achieving financial fluency.
How will the commercial space race affect the market?
Leaders of the space industry have benefited the most from this uptick in interest. United Launch Alliance is a partnership between Lockheed Martin ( LMT) and Boeing ( BA) formed in 2006. The partnership on average makes $225 million from the US government per launch. Lockheed Martin is up more than 44% this year and over 381% in the past five years. Boeing is up 120% in the past year and 362% over the past five years as the commercial space race has continued to heat up.
SpaceX has started to take some of the yearly revenue away from United Launch Alliance as its technology continues to improve and get cheaper. Musk has also been able to use the limelight to promote his other major company, Tesla. Although we cannot find a distinct direct link between the two companies success, there is definitely some type of connection. Rumors about potential mergers constantly surface, which could be mutually beneficial for both companies.
SpaceX
This would allow Musk to use capital from either company to fund the other, which would diversify his holdings in case one of the companies were to face financial hardship. Tesla and SpaceX also share engineers when it comes to technological advancements. Tesla once approached SpaceX in an attempt to deal with an aluminum casting issue. SpaceX helped them with the issue, and it saved Tesla roughly eight hours per car in manufacturing. Regardless of the correlation in stock upticks, Tesla and SpaceX necessarily have a close relationship due to their leadership.
Reports estimate that space tourism could soon become the next billion-dollar market within the next two decades. Simply due to the sheer cost of the operation, there is a lot of money to be made. So far, a handful of rich individuals, such as the first private-paying individual to fund his own space trip, Dennis Tito, have paid up to $20 million to fund trips.
In addition, the costs of trips with Virgin Galactic and Blue Origins range anywhere from $200,000 to $300,000 per person. With such a high price tag, we are clearly years away from lower-income families having the chance of taking a trip around the moon. However, as SpaceX continues to cut down costs with reusable rockets and engine simplification, it’s only a matter of time before space travel becomes a reality for all. By surrounding yourself with a greater understanding of the markets, you can continue to step closer to financial fluency.
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Originally published at https://blog.rapunzlinvestments.com on February 2, 2018.
