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Investing In The Final Frontier

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Space, the final frontier, is a near-vacuum that’s freezing cold and full of harmful cosmic radiation. But, for some enterprising companies, it might prove to be the next big thing.

While many investors prefer putting their money in sectors with nearer-term benefits, space could be one of the biggest long of them all.

According to Morgan Stanley, several recent events support the transition of the $350 billion global space economy from mostly being the domain of private equity to public equity, as reported by Bloomberg and CNBC.

These developments include rising concerns about …

  • Russia’s satellite maneuvers
  • China’s expanding space capabilities
  • The growing prevalence of airplane-borne rocket launchers
  • Quest to have Space Force as part of the U.S. Airforce
  • NASA plans to have manned rocket flights to the International Space Station

Morgan Stanley’s Adam Jonas sees the space economy expanding to at least $1.1 trillion by 2040 mainly driven by national security concerns and, more specifically, “tech communications”.

Easy Money

Morgan Stanley’s projections might seem a tad ambitious when you consider that NASA, the world’s biggest space agency, has a budget of just $20 million.

But that’s because most people limit their thinking of the space industry to companies that build rockets and the vehicles that fly around space such as Boeing, Lockheed Martin and Airbus’ subsidiary Arianespace as well as a handful of private companies led by Elon Musk’s SpaceX or Richard Brandon’s Virgin Galactic.

That type of linear thinking ignores the next tier—the companies that actually operate the satellites in space—Inmarsat, Honeywell, Northrop Grumann.

Related: No College, No Problem: Silicon Valley’s Student Loan Solution

Morgan Stanley says satellites in orbit will explode from 1,400 currently to more than 20,000 two decades from now. By 2020, we will be launching at least 500 satellites every year as launching costs continue coming down at a nice eight percent annual clip.

Yet, the Wall Street analyst predicts that most of the money in the new global space economy will flow to more earthbound companies--internet, ground equipment and consumer broadband  market. Indeed, MS says that these 20 companies will account for two-thirds of the revenue forecast:

  • Adobe
  • Alphabet
  • Analog Devices
  • Amazon
  • Apple
  • Boeing
  • Facebook
  • GoDaddy
  • Honeywell
  • Inmarsat
  • Intuit
  • Lockheed Martin
  • Microsoft
  • Northrop Grumman
  • Qualcomm
  • SES
  • Shopify
  • Softbank
  • United Technology
  • XL Group

If you are thinking that it’s too early to invest in the coming space boom, consider all the easy money that’s already flowing into SpaceX’s coffers. Equidate's global head of business development, Robert Hilmer, told CNBC: “SpaceX is one of [the most], if not the most, popular pre-IPO tech companies globally.”

He says that interest in SpaceX is so high that the company can almost effortlessly access an unlimited amount of funding in private markets: "Everywhere I travel around the world, investors of all types — individuals, family offices, hedge funds, sovereign wealth funds or private equity — want to get into SpaceX," Hilmer said. "It's almost all investors I talk to."

SpaceX was ranked #1 in CNBC’s 2018 Disruptor 50 Companies list. The company’s most recent round of funding raised $500 million thus valuing it at $27.5B.

But only ultra longs need apply.

SpaceX investors have a very long-time horizon—as much as 15 years-- before they can expect to see a return. But as Jonas advised, investors can’t be too early to get into this game.

By Alex Kimani for Safehaven.com

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