SGH Wealth Management: What I'm Reading

Investing in Space Travel, Are We There Yet?

SGH Wealth Management’s “Read What I’m Reading” June. 2021 | June. 8th, 2021

Piggybacking on the recent 60 Minutes episode, we are about to get a full report from the government on what it knows about UFOs. But is outer space ready for the investor?

It has yet to be proven that passengers can be safely delivered a space experience, though Jeff Bezos’ Blue Origin is expected to launch its first crewed flight when its new Shepard rocket launches on July 20.  Virgin Galactic, a part of Richard Branson’s Virgin Group, plans four test flights of its SpaceShipTwo system before it tries commercial service in 2022.  The first full revenue flight, where the Italian government has booked members of the Italian Air Force at $500,000 per seat, will fly later this year.  Elon Musk’s SpaceX, meanwhile, is focusing on a different market, launching Starlink satellites that are expected to offer internet service to earthbound consumers.  So far, the company has launched 1,500 interconnected orbiters.

Virgin Galactic recently reported a loss of (-$55.9) million in the first quarter of the year, after losing (-$59.5) million in the last quarter of 2020, and (-$63.6) million in the quarter before that.  Its upcoming flight will generate just $2 million, which means the company would have to book at least 35-40 flights a year to break even and one has to wonder how big a market there is for tourists lining up to pay up to $500,000 for a trip.

A more plausible business model is Aerojet Rocketdyne’s; the company’s Space Launch System is paid for via aerospace and defense contracts, rather than upscale tourists looking for a thrill.  Another defense contractor, Northrup Grumman, focuses on a Mission Extension Vehicle initiative, which refuels satellites in space and returns them to operational status.  Others look more questionable.  Nokia Corp. has landed a contract to setup a 4G cellular network on the Moon, should NASA later find a way to colonize it.

Meanwhile, competition is on the way.  A rocket builder called Astra, housed in the former U.S. Navy Air Station Alameda, CA, has already launched its 40-foot Electron rocket into space, and has plans to reach orbit next year.  The company anticipates charging $2.5 million per launch, carrying communication satellite payloads up to 300 kilograms into low-Earth orbit.  The company is going public through acquisition by a special purpose acquisition company (SPAC) but is not trading on any exchange.

More WallStreetBets madness ensues as we were asked our thoughts on their next potential Detroit-based company target in the first link below

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