Finance

Space infrastructure is the next investment frontier and Spacs are a launchpad

More than 50 years after Apollo 11 put astronauts Neil Armstrong and Buzz Aldrin on the Moon, a new age of space exploration is beginning. This century’s adventurers are pushing the boundaries of space exploitation — and investors are taking notice.

This year and last have seen a wave of space companies going public, often by way of a Spac (special purpose acquisition company). New products are being launched to capitalise on the industry, such as the Ark Space Exploration and Innovation ETF ARKX, which came to market in March.

What we see now is initial interest in a sector that has an infinite growth trajectory and is only getting started. Consider the markets and industries that you know today. While they continue to grow because of rapid innovation, new technology and an influx of data from satellites in space, they are only focused on Earth. It is a matter of time until their growth expands into space, requiring a range of more (and new) services and an infrastructure to support the growth.

Simon Drake, co-founder of Space Ventures Investors, captures this thought when he says: “What sets space investing apart from other sectors is that the space industry has no boundaries; humanity will always push at new frontiers.”

The business of space is in its exponential growth phase and what unifies all current projects is the need to create complex new technologies and infrastructures to manage space missions of any size. According to a recent report by Morgan Stanley, reusable rockets, decreasing launch costs and the miniaturisation of satellite technology are opening up new business opportunities.

In the past 10 years, $177.7bn of equity investment has been made into 1,343 space companies. The global space industry is expected to generate revenue of $1.4tn or more by 2030, up from $350bn in 2020.

Right now, close to 3,000 satellites are orbiting Earth. This number is expected to increase quickly. By 2025, experts predict a 230% increase in satellite launches each year, with 24,000 launches currently being planned — and that figure does not include those by Tesla CEO Elon Musk’s SpaceX, OneWeb or Kuiper. SpaceX’s Starlink, for example, has applied to fly 40,000 satellites.

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These satellites have the potential to add value to industries, businesses and users via satellite data. As agriculture becomes agritech, finance becomes fintech, education becomes edtech and automobiles become autonomous driving vehicles, the growth of added-value data use on Earth — most of which is coming from space — will necessitate the launch of more satellites.

As such, the most scalable form of business may well be operating a constellation, or group, of satellites working together as a system.

Space companies have plans to launch large-scale constellations of thousands of satellites to provide global services or internet of things services to connect machines and systems directly.

Typically placed in low, complementary orbital planes and connected to ground stations, satellite constellations can provide permanent global or near-global coverage, enabling internet access to areas that have long suffered from a lack of ground infrastructure.

“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,” notes Adam Jonas, an equity analyst at Morgan Stanley.

“We believe the largest opportunity will come from providing internet access to unserved and under-served parts of the world, but there is also going to be increased demand for bandwidth from autonomous cars, the internet of things, artificial intelligence, virtual reality and video.”

For the space economy to exploit its potential, it will require a solid infrastructure of orbital transportation services. This will go beyond fundamental launch and deployment services and expand into areas such as in-orbit services.

For example, D-Orbit, my company, provides advanced AI-powered services in orbit after having delivered transported satellites, in a timely and efficient manner, to their operating destination.

D-Orbit will also involve fleets of dedicated vehicles to inspect satellites and extend their lives by repairing, refuelling and sometimes repositioning them, and salvage exhausted satellites for reuse and recycling.

Debris removal will also become increasingly important in the age of mega-constellations, when hundreds or even thousands of satellites will be formation-flying in low orbits. Any failing satellites that drift away uncontrolled may threaten the entire constellation, so dedicated space-servicing vehicles will be essential.

Another growth area will be Earth observation, which is able to provide precise data on the displacement of buildings, bridges and highways. Companies that have access to small satellites with synthetic aperture radar payloads will be able to reveal, for example, that a bridge has moved 3mm in the past year and evaluate its safety accordingly.

Given this scenario, investors are taking heed of myriad investment opportunities. Spacs are viewed favourably as a way for space companies to access the public markets. Several space companies have gone the Spac route, including BlackSky, a satellite imagery specialist, and Rocket Lab US, A US-New Zealand aerospace manufacturer.

“The Spac phenomenon is actually very well aligned with the horizon and nature of space investing because it has a venture capitalist mindset,” says Morgan Stanley’s Jonas.

He describes the Spac approach as a “democratisation of venture capital and private equity”, which is now “coinciding with a major inflection of interest in space investing across all of our clients, institutional and retail”.

While tenacity, expertise, ingenuity and upfront capital are still required to launch space-based businesses, today’s entrepreneurs are meeting the challenges. They are building a robust commercial space industry driven by visions of opportunity similar to those that animated the space pioneers of the Sixties.

If the global industrial market reaches the limit sooner than later, the infinity of space suggests the space economy will keep growing.

Luca Rossettini is CEO and co-founder of D-Orbit, expert at the Space Advisory Group of the European Commission, board member of AIPAS, the space SME industrial association, and corresponding member of the International Academy of Astronautics.

This article was published by MarketWatch.

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