Can you invest in space travel?

With Jeff Bezos marking the 52nd anniversary of the moon landing by blasting himself into space on July 20, 2021, many are seeing the dawn of the age of space tourism (at least for the wealthy).

The job of getting people and equipment into space is already big business – with the space industry generating an estimated $300b a year in revenue. Elon Musk’s SpaceX alone has a purported market valuation of $74 billion. However, most of those revenues have little to do with imagination-capturing ideas about flying tourists to space or colonising Mars. Instead, it’s in the comparatively mundane business of getting satellites into orbit that most money is made today.

Space tourism remains a highly speculative field and it is yet to be seen whether a sustainable business model can be found.

There has been a rush of companies and entrepreneurs into the space market over the past 15 years, aided by a US government decision to deregulate the sector and encourage private investment in 2004. There is now a long list of yet-to-be profitable start-ups operating alongside long established players like Boeing and Lockheed Martin. Here are some of the major companies operating in the sector:

Jeff Bezos’ extraordinary success in building Amazon into a global behemoth has made him the richest person in the world by some margin. Yet that appears to have been something of a warm-up act for the legendary entrepreneur who, by all accounts, has had his eyes fixed on the cosmos since childhood.

Blue Origin’s mission statement is as simple as it is grandiose “To build a road to space so our children can build the future” and Bezos is backing it in a big way, selling around $US1 billion in Amazon stock every year to put into the business.

The company is developing reusable launch vehicles and is working on lowering costs to make space travel economically feasible. The company, however, is in no rush, stating “slow is smooth and smooth is fast” so it’s very unlikely ordinary investors will get an opportunity to buy into the company any time soon. 

Since its establishment in 2002, SpaceX has become entrenched in the US space industry, courtesy of a number of multi-billion dollar NASA contracts, including to deliver cargo to the International Space Station. The company is also working to redevelop reusable rockets.

In the longer term, however, Elon Musk’s goal is to eventually build a colony on Mars, though the economics of such a move are far from clear. SpaceX remains in private hands and has no plans for an IPO anytime soon.

Founded by British entrepreneur Richard Branson in 2004, Virgin Galactic is working towards the goal of taking tourists into space. The company’s initial focus is on sub-orbital flights where tourists can experience a few minutes in a micro-gravity environment, but it has longer-term ambitions of offering flights to tourist destinations on earth as well as offering super-fast point to point travel on earth, by flying into space and back.

It currently expects to launch its maiden flight of paying customers in 2020, though previous predictions from the company, dating back to 2008, have been off the mark.

Virgin Galactic listed on the New York Stock Exchange in 2019, under the ticker SPCE, and has had periods of high volatility since then.

The likes of Boeing, Lockheed Martin and Airbus have been involved in space programs for decades – Boeing, for instance, built the Apollo 11 spacecraft – and continue to partner with the likes of SpaceX and Blue Origin.

These three companies are publicly listed – Boeing and Lockheed Martin in the US, Airbus in France and Germany – though investors and traders should note that space programs make up only part of their earnings.

There are also a number of other less well-known companies in this space, including Northrop Grumman, Maxar and Aerojet Rocketdyne. These are stocks that can be traded via CMC’s share trading platform.

Exchange traded funds​ are popular with investors who are looking for exposure to a particular sector or market. There are now ETFs for the growing space sector, such as the Procure Space ETF (UFO) and the ARK Space Exploration & Innovation ETF (ARKX), which have holdings in a diverse range of companies, including many of those mentioned earlier.

Even 15 years after the deregulation of the sector in the US, the space industry – at least outside of major, diversified industrial and aeronautical companies – remains in its infancy. The sector took a step forward with the listing of Virgin Galactic though its business model – and those of other space pure-plays – is yet to be proven. Significant logistical and cost challenges remain, and profits are so far virtually non-existent. Still, it’s undoubtedly a sector that has captured the imagination of the public and will continue to attract investors and entrepreneurs alike.