Jan 25

Jan 25 Investment Opportunities in the Outer Space Public Market

NASA Rings NASDAQ Closing Bell (Courtesy of NASA)

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

— Warren Buffett

***Update 11/10/2022*** Obviously some of the companies described in this post did not age well. With the stock market having the year it did and really punishing the high growth companies, the valuation of many space companies is collapsing/have collapsed. So for those of you reading this in a post mid-2022 world, please remember my disclaimer below (I have definitely lost lots of value on some of my long investment below as well) and know that this space is still full of risks!

***Update 2/18/2021*** Shortly after the publication of this post. Another emerging company, Astra, went public via the SPAC, Holicity (Ticker: HOL). Astra is a launch operations company that reached Outer Space on its second attempt in late December. For more information about Astra, see here. Full disclsoure: I am long HOL.

For many, a visit to Outer Space is but a dream; even with space tourism taking off, the current price is insurmountably high for many. While I have no doubt that commercial spaceflights will become as popular and as common as commercial airflights are today, it will likely take us a few decades to get there. So, if you are just an average Joe or Jill, is there another way for you to lay a personal stake in this next frontier?

Well, you need not look any farther than the public markets. According to many, Outer Space is likely to become the next trillion-dollar market. And while some of the most highly anticipated companies in this sector are still private, there are some enterprises whose shares are publicly traded on the stock markets. In this post, I will provide a brief overview of some leading publicly traded Outer Space-related companies and exchange traded funds (ETFs) oriented on Outer Space.

***ADDITIONAL DISCLAIMER: this post is not financial advice and is provided for informational and entertainment purposes only. I am not a certified investment advisor or a financial planner. The information below are my opinions and are not suggestions to buy or sell any securities. Please perform your own due diligence and consult a financial professional before trading.***

Individual Outer Space-related Stocks

For this post, I have grouped Outer Space-related public companies in one of four buckets: (1) Communications (Tickers: SATS, ETL, GILT, IRDM, LORL, MAXR, SESG, FINMF, THLEF, VSAT), (2) Defense (Tickers: GD, LMT, NOC, RTX, BA), (3) Emerging Companies (Tickers: NPA, SRAC, SPCE), and (4) Space Propulsion (Tickers: AVIO, BWXT, IHICF). While some enterprises can straddle among several of these categories, I have placed them in, what I feel, is their primary classification.

Communications

Ever since the launch of the first artificial satellite, Sputnik 1, humanity has been relentlessly advancing its satellite communications technology. Hence, it is no wonder that many of the public companies focused on Outer Space are in the satellite communications sector.

EchoStar Corporation (Ticker: SATS)

Headquartered in Englewood, Colorado, EchoStar Corporation is focused on satellite communication and internet services. Having launched its first satellite in 1995, EchoStar currently has a fleet of 9 satellites in Outer Space with a majority operating in the Ka band. Globally, EchoStar has 2,100 employees and founded Dish Network, a brand of satellite television broadcasting services. With Dish Network having been spun off in 2007 and the acquisition of Hughes Communications in 2011, EchoStar has become a primarily telecommunications-focused company.

Eutelsat S.A. (Ticker: ETL—Euronext Paris)

An acronym for European Telecommunications Satellite Organization, Eutelsat was originally established as an intergovernmental organization to provide Outer Space-based telecommunications services for Europe. Based in Paris, the company currently has five divisions of services: broadcasting, air and maritime connectivity, broadband, data networks, and governmental services. Eutelsat has one of the largest fleets of satellites with 35 in Geosynchronous orbit.

Gilat Satellite Networks Ltd. (Ticker: GILT)

An Israeli company, Gilat Satellite Networks invests in four types of technologies for its telecommunications services: (1) Very-small-aperture terminal (VSAT) satellite networks, (2) mobility networks, (3) antenna networks, and (4) block upconverters networks. With these networks, the company provides services and solutions for mobile connectivity, cellular communications, residential broadband, enterprise as well as government and defense communications.

Iridium Communications Inc. (Ticker: IRDM)

A component of the S&P 600, Iridium Communications employs over 600 personnel across the globe and operates a constellation of satellites. In 1990, Motorola introduced Iridium publicly as the world’s first global satellite communications system and incorporated the company by its namesake idea in 1991. But, because of a lack of mainstream adaption and mismanagement, the company filed for Chapter 11 bankruptcy in 1999. The current version of Iridium Communications is what emerged from that bankruptcy in 2001 after the U.S. government saved the company’s constellation with a multimillion-dollar communications contract. Currently, Iridium operates a new constellation of 66 active cross-linked satellites in Low-Earth Orbit.

Loral Space & Communications Inc. (Ticker: LORL)

Headquartered in New York City, Loral Space & Communications was born from a divestment of Loral Corporation in 1996. Focusing primarily on space and communications systems, Loral owns 62.7% of Telesat, a large global satellite operator with fleets in both GEO and LEO. It also owns 56% of XTAR, a joint venture with several Spanish telecommunications providers that provide X-band services to governmental entities via its XTAR-EUR and XTAR-LANT satellites.

Maxar Technologies (Ticker: MAXR)

A part of the Russell 2000, Maxar Technologies trades on the New York Stock Exchange and the Toronto Stock Exchange. Formed as a part of the merger between McDonald, Dettwiler and Associates and DigitalGlobe, Maxar focuses on the production of communications and observations satellites as well as other space-based infrastructures. Currently, it has several significant contracts with NASA including a $142 million award for building a robotic arm for OSAM-1 and constructing the power and propulsion element for NASA’s Lunar Gateway.

SES S.A. (Ticker: SESG—Euronext Paris)

SES, short for Société Européenne des Satellites, is a Luxembourg-based satellite company focused on video and data communications. The company has a large fleet of 60 active satellites located in GEO (40 active satellites) and MEO (20 active satellites). With over 2,000 employees, SES was founded in 1985 with help from the Luxembourg government. Internationally, SAS’ umbrella of satellite operators include QuertzSat, Ciel, GovSat, and YahLive.

Thales Alenia Space

A joint venture between Leonardo S.p.A. (Ticker: FINMF—Over the Counter Markets) and Thales Group (Ticker: THLEF—Over the Counter Markets), Thales Alenia Space is Europe’s largest satellite manufacturer. The company will be heavily involved in the construction of the Lunar Gateway with the European Space Agency awarding TAS a $362 million contract to build the International Habitat module, and the European System Providing Refueling, Infrastructure and Telecommunications (ESPRIT) components.

ViaSat Inc. (Ticker: VSAT)

ViaSat is near and dear to my heart because it is headquartered in Carlsbad, a city within San Diego county. With over 5,600 employees, ViaSat was founded in May 1986 and IPOed in December 1996. The company focuses on high-speed satellite broadband services for home, in-flight, businesses, and governmental defense organizations. In late December 2020, the company acquired RigNet, a network provider to the oil and gas industry. ViaSat currently has three wholly-owned satellites in Outer Space: ViaSat-1, ViaSat-2, and WildBlue-1 while having operational capability on two third-party satellites: Eutelsat’s KA-SAT and Telesat’s Anik F2. In 2021, ViaSat is expected to launch its ViaSat-3 constellation, a set of 3 satellites that will operate in the Ka-band.

Defense

While the Outer Space Treaty prohibits the militarization of Outer Space, it does not forbid the use of military equipment or personnel for peaceful purposes. Hence, the military-industrial complex is very much alive in Outer Space. Therefore, several public companies that account for a large portion of the defense budget have a major role in the Outer Space market as well. Below, I list out a few prominent ones with public tradable stocks.

General Dynamics Corporation (Ticker: GD)

General Dynamics was founded in 1954, employs over 100,000 employees, and booked $39.4 billion in revenue in 2019. By designing and building the communications device onboard Apollo 11, General Dynamics played a significant role in broadcasting humanity’s first steps on the Moon. While the company is involved in the Outer Space sector, it is acting more as a supporting player. For instance, it currently serves as a subcontractor in the Commercial Crew Program by designing and building communications and navigation systems for Boeing’s Starliner.

Lockheed Martin Corporation (Ticker: LMT)

Founded on March 15, 1995, Lockheed Martin is primarily known as an aerospace defense company. However, the company has a full division dedicated to its space-related projects. In fact, its space division is well known for its joint venture with Boeing that formed the launch service provider, United Launch Alliance. Late last year, Lockheed Martin has further its space-related capabilities by acquiring the famed spacecraft propulsion manufacturer, Aerojet Rocketdyne. This vertical integration will help Lockheed Martin to better compete with the likes of SpaceX and Blue Origin, both currently private.

Northrop Grumman Corporation (Ticker: NOC)

Headquartered in Falls Church, Virginia, Northrop Grumman generated over $33 billion in revenue in 2019 and employs over 90,000 individuals globally. In 2018, it acquired Orbital ATK which greatly expanded its footprint in the Outer Space sector. After a realignment in 2020, Northrop Grumman’s space-related ventures have been consolidated in its Space Systems division. Northrop Grumman is one of NASA’s leading contractors; the company has a multi-year contract helping to supply the International Space Station via its Cygnus spacecraft which launches onboard its Antares rocket system. In addition, Northrop Grumman was recently awarded a $187 million contract to design the habitation module for the Lunar Gateway, a space station in the lunar orbit that will be essential for a crewed return to the Moon.

Raytheon Technologies Corporation (Ticker: RTX)

Trading on the New York Stock Exchange and a component of the S&P 100, Raytheon Technologies is about to have its 100th birthday in 2022. Headquartered in Waltham, Massachusetts, its Intelligence & Space division was recently boosted by the acquisition of Blue Canyon Technologies, a satellite manufacturer. This will likely increase its Outer Space presence, providing support for its defense contracts with U.S. Department of Defense and intelligence agencies.

The Boeing Company (Ticker: BA)

While widely known for its commercial airplane division, Boeing has a strong presence in the Outer Space sector as well. Currently, its signature Outer Space project is the Starliner, a commercial crew spacecraft that will be used to ferry personnel to and from the International Space Station. However, unfortunately, the project is behind schedule and its competitor—SpaceX—in the Commercial Crew Program already has a fully functioning and certified spacecraft. Aside from Starliner, Boeing is one of the primary contractors involved in the construction of the Space Launch System, NASA’s future heavy duty rocket for deep space exploration missions. Additionally, alongside Lockheed Martin, Boeing is a co-owner of the joint venture, United Launch Alliance.

Emerging Companies

Within the last two years, several emerging Outer Space-related companies have propelled themselves into the public market via mergers with special purpose acquisition companies (SPACs). While this type of public market trend is beyond the scope of this post, I want to focus on several young companies that have gone through such acquisitions. Please note that because these are emerging companies, none of them are currently cash-flow positive and are not expected to generate profits for several years.

AST & Science, LLC (Ticker: NPA)

Developing a space-based cellular broadband network, AST & Science will become a public company via a SPAC named New Providence. A Midland, Texas based company, AST wants to operate a constellation of satellites that can deliver broadband services to smartphones directly from Outer Space. In April 2019, the company successfully launched its first experimental satellite into space. Named Bluewalker 1, the satellite has been serving as an Outer Space sandbox for testing AST’s technology. While AST is expected to launch another satellite, BlueWalker 3, sometimes in 2021, the company will need to address NASA’s objections that its satellites might represent a space collision threat.

Momentus Inc. (Ticker: SRAC)

Getting ready for its public debut via its combination with a SPAC named Stable Road Acquisition, Momentus is a space infrastructure company that offers last-mile satellite and cargo delivery services. Essentially, Momentus’ spacecrafts will act as space tugs that will move satellites and payloads to their final destinations in Outer Space. Its technology can also potentially be used to deorbit space debris—or what I like to call “kondo the crap out of LEO”. To do this, the company is developing microwave electrothermal propulsion technology that will use water, a much safer element than chemical propellants, as its fuel. Momentus was expected to launch its first operational mission, Vigoride-1, later on this month but this has been delayed because the mission’s payloads still have not received FAA’s approval. One other thorny issue that Momentus must deal with is that since its CEO is Russian, he can’t use his company’s technology because of export control laws. Full disclosure: I am long SRAC.

Virgin Galactic (Ticker: SPCE)

A part of the Virgin Group, Virgin Galactic is focused primarily on space tourism. Its spaceships—with all of their callsigns beginning with VSS (Virgin SpaceShip)—can take up to six passengers per flight (along with two pilots) for a 2-hour ride that will enable space tourists to experience a few minutes of weightlessness. While it had been mired by early tragedy, the company achieved success in December 2018 when its VSS Unity spaceship reached an altitude of 80 km above sea level (which might be counted as Outer Space). Though Virgin Galactic originally sought to launch its first paid flight later on this year, a failed test flight in December 2020 might delay the schedule. Full disclosure: I am long SPCE.

Space Propulsion

The first step in any Outer Space adventure is for us to escape our earthly chains. Hence, there are several companies out in the public market vying to become one of the preferred manufacturers in solving the rocket equation.

Avio S.p.A (Ticker: AVIO—Italian Bourse)

Headquartered in Rome, Avio was founded in 1908 and has about 1,000 employees worldwide. As a major contractor for the European Space Agency, Avio is primarily known for being a subcontractor to the Ariane program and the prime contractor to the new family of European rocket launchers named Vega. While Vega had a successful series of 14 launches since debuting in 2012, it had an accident in July 2019 and spent 14 months out of service before another failed launch attempt late last year. However, the company’s CEO, Mr. Giulio Ranzo, has promised to fix the mistakes and to “restore the credibility of the launcher” as soon as possible.

BWX Technologies, Inc. (Ticker: BWXT)

BWX Technologies, Inc. operates in the nuclear industry and is a component of the Russell 1000. The company first started trading on the New York Stock Exchange on July 1, 2015 when it was spun off from Babcock & Wilcox Enterprises. With a $18.8 million contract, BWX Technologies is currently work with NASA on Nuclear Thermal Propulsion technology. The company also expressed interest in NASA’s potential plans for constructing nuclear power plants on the Moon.

IHI Corporation (Ticker: IHICF—Over the Counter Markets)

Originally known as Ishikawajima-Harima Heavy Industries Company, IHI Corporation is headquartered in Tokyo and trades on the Tokyo stock exchange. A heavily industrial company, IHI Corporation is one of the key players for the Japanese Outer Space industry. It is known for its H-IIA and H-IIB family of rockets, the M-V rocket, and the Epsilon launch vehicle. IHI is also a maker of rocket and satellite propulsion systems.

United Launch Alliance

A joint venture between Boeing (Ticker: BA) and Lockheed Martin (Ticker: LMT), United Launch Alliance (ULA) is known for its large fleet of rockets. Currently, its active rockets include the Atlas V, the Centaur, and the Delta IV. It operates launch facilities both on United States’ East Coast (at Cape Canaveral) and West Coast (at Vandenberg). While it had a firm grasp on the U.S. military launch market in the early 2000s, it is starting to face stiff competition from SpaceX. Hence, ULA is currently spending a lot of energy in developing its latest rocket, the heavy-duty Vulcan Centaur which is scheduled to launch in late 2021.

Outer Space Exchange-Traded Funds

If you want to hedge your bet and focus on the entire Outer Space market rather than a few specific companies, then exchange-traded funds (ETFs) might be the option for you. An ETF is a fund that tracks a specific set of underlying securities that such fund originator owns. ETFs can be traded on a stock exchange and provides investors exposure to a broad spectrum of companies. Currently, two ETFs focused on the Outer Space are available for trading: ROKT and UFO. But, in the near future, another well-known disruptive technology-oriented investment fund will likely launch an ETF (ARKX) in this sector as well.

Procure Space ETF (Ticker: UFO)

A product of ProcureAM LLC, the Procure Space ETF (UFO) is dedicated to companies in the Outer Space sector. It demonstrates this focus by having 80 percent of its funds funneled into enterprises that derive a majority of their revenues from space-related activities. Specifically, this ETF contains businesses around the world that are focused on satellite-based telecommunications, rocket and satellite manufacturing, deployment, operation, and maintenance, manufacturing of ground equipment used with satellite systems, space technology and hardware, and space-based imagery and intelligence services. Hence, UFO contains many of the companies that I discussed earlier. Full disclosure: I am long UFO.

SPDR Kensho Final Frontiers ETF (Ticker: ROKT)

Debuting in October 2018, SPDR Kensho Final Frontiers ETF (ROKT) was launched and is currently managed by SSGA Funds Management, Inc. This fund has a focus on Outer Space companies that support, operate, or manufacture spacecraft, launch vehicles, rockets, satellites, infrastructure and mission-support services. ROKT also contains companies focused on deep sea exploration. Compared to UFO which is more focused on satellite broadcasting and telecommunications sub-industries, ROKT is more heavily skewed toward aerospace and defense companies. So, ROKT also contains many of the companies that we have reviewed earlier.

ARK Space Exploration ETF (Future Ticker: ARKX)

While it is not currently available, ARK Invest is widely expected to jump into the Outer Space sector with its own ETF in a few months. ARK Invest is well-known for making the Tesla $4000 call when no one thought it was possible. While the composition of the ETF is still unknown, many of the previously discussed stocks shot up as potential candidates for inclusion in this fund. ARKX’s managing investor, Catherine Wood, is a well-respected value investor who tend to have a long-term (read: 5 or more years) horizon on companies in her portfolio. Full disclosure: I am expecting to purchase shares of this ETF once it becomes available.

Blasting Off for the Future

Investing in Outer Space is expected to be a central market theme in 2021. It is a sector that is truly limitless in its bounds and potential. While the current public market seems to be filled with aerospace and defense companies with government-driven contracts, satellite-oriented and emerging companies focused more directly on Outer Space technology are starting to claim their footholds. Enterprises such as Virgin Orbit and Starlink are also waiting in the wings.

While I went through, what I believe, are the leading public companies in the Outer Space sector, this is by no means an exhaustive list. If investments in this sector piques your interest, some other companies with an Outer Space focus that you might want to check out are: Airbus (Ticker: EADSY-Over the Counter Markets), Analog Devices, Inc. (Ticker: ADI), Ball Corporation (Ticker: BLL), Dish Network Corporation (Ticker: DISH), Garmin Ltd. (Ticker: GRMN), Globalstar, Inc. (Ticker: GSAT) Honeywell International Inc. (Ticker: HON), Intelsat Corporation (Ticker: INTEQ-Over the Counter Markets), Jacobs Engineering Groups, Inc. (Ticker: J), L3Harris Technologies (Ticker: LHX), Mercury Systems, Inc. (Ticker: MRCY), ORBCOMM Inc. (Ticker: ORBC), Sirius XM Holdings Inc. (Ticker: SIRI), SKY Perfect JSAT Group (Ticker: 9412—Tokyo Stock Exchange), Speedcast International Ltd. (Ticker: SDA—Australian Securities Exchange), Teledyne Technologies (Ticker: TDY), and Weathernews Inc. (Ticker: 4825—Tokyo Stock Exchange).