Investor interest in the space technology sector has boomed, with global private investment for the first half of the year totalling $6.4bn (£4.7bn).
The latest figures from the Seraphim SpaceTech Venture Capital Index reveal that the investments made in the first six months of 2021 represent almost 85% of the funding recorded for the whole of 2020.
The appetite for space-related opportunities has also increased among retail investors, with 12 businesses in the sector announcing special purpose acquisition company (SPAC) mergers this year at a total of $7bn.
When it completed its IPO in July, the Seraphim Space Investment Trust had smashed its £150m fundraise target, with backing from Richard Branson who is aiming to commercialise journeys into space via his Virgin Galactica business.
“The investment made by entrepreneurs such as Branson, Elon Musk and Jeff Bezos has already greatly enhanced society’s capabilities in space, helping to create innovative solutions and supporting new companies that are addressing major issues such as mitigating the effects of climate change and providing three billion people with internet access,” says Konstantin Sidorov, CEO and founder of the London Technology Club.
“The chance for millions of retail investors to now invest in the future of space technology will catalyse the process of creating many billion-dollar companies and accelerate the rate of space innovation. This is another clear example of how collective private capital investment can be used to find solutions to some of the world’s biggest challenges.”
See also: Seraphim Space trust blasts past £150m IPO target
Space industrial revolution is in full swing
Last week, Musk (pictured) tweeted that his company, SpaceX, would be ready to land people on the moon by 2024 with its Starship human lander.
In April, SpaceX was awarded a near $3bn NASA contract to design and build a lunar lander, beating a rival team from Blue Origin, the space company founded by Amazon’s Jeff Bezos.
The Blue Origin team protested the contract, which was denied by the US Government Accountability Office in July – the same time that SpaceX was handed an addition $300m to boost the project.
James Bruegger, chief investment officer of Seraphim Space, says: “Space tech is at the nexus of mega-trends that will define societal change over forthcoming decades and is now playing a unique role in addressing the world’s most pressing problems. Radical advances in the space sector mean a data and connectivity tsunami is transforming the world as we know it, driving the next major paradigm shift in the global economy.
“The space industrial revolution is demonstrably in full swing as 34 rockets launched 573 satellites during the quarter. The new space economy is now primed for a record-breaking 2021 and beyond.”
Ryan Hughes, head of investment research at AJ Bell, agrees that the interest in space travel is fuelling the interest in the sector.
“The concept of space travel has fascinated humanity for hundreds of years and it’s only recently that this has become a reality. This is pushing the investment potential of space onto the radar, particularly given the high-profile success of Elon Musk’s SpaceX, and there is no doubt that further development will occur in the years to come,” he says.
Fidelity and Baillie Gifford lend credence to space tech sector
Well-known asset managers have already started to include space-related investments in their portfolios. Both Fidelity and Baillie Gifford, for example, have previously held SpaceX.
Hughes warns, however, that it is impossible to ignore that this is a very niche area in the very earliest stages of infancy and while exciting, it may be wise to tread carefully.
“Some investors in the likes of the excellent Scottish Mortgage investment trust may not realise they already have exposure to space travel via the SpaceX investment and given just how early stage this area is, gaining limited and controlled exposure through a strategy like Scottish Mortgage seems a more suitable approach for the vast majority of investors,” he says.
Critical not to get caught up in the story
Adrian Lowcock, independent wealth consultant, agrees. “This is clearly an area generating a lot of interest as news headlines draw attention to the sector. While some fund houses are investing in specific companies which are linked to the sector that can often be due to specific opportunities and related to the company and not necessarily an endorsement of the sector itself.”
He warns, however, that fortunes can be made and lost in new industries. “Investors need to balance the appeal of accessing a new frontier with pragmatism. It is critical not to get too caught up in the story and ‘unlimited’ potential as this will likely take decades to be realised.”
For those investors who do want to invest more directly, Hughes says that it is vital they understand the high-risk nature of the investments and proceed as part of an existing, well diversified portfolio.
“It should be viewed as a very long-term investment given that many of the companies involved are early-stage investments,” he adds. “This has the potential to be a hugely exciting area for many years to come but we can be certain that there will be many bumps on the journey towards the launch pad, let alone the stratosphere.”
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