It was not the most auspicious start to the UK’s effort to be the first European country to launch satellites into space.
January’s ‘Start Me Up’ mission ended in failure after the rocket carrying nine satellites from seven organisations, which would have been central to British commercial and military involvement in the ‘space community’, suffered an ‘anomaly’ that ultimately saw them lost in space.
This is not just a blow for Virgin Orbit, the company leading the mission, but for the leagues of financial organisations that have espoused the potential spoils of investment in the space sector, that has resulted in a USD12.2 billion investment in space tech over the 12 months to end of the third quarter 2022.
However, Tom Bailey, head of ETF research at HANetf, issuer of the Procure Space UCITS ETF (YODA) which does not hold Virgin Orbit, says the failed mission represents only a setback for the sector.
“While disappointing, we do not think it reduces the appeal of investment in the space sector. Globally we’ve seen many successful missions from other firms. This slight setback for Virgin Orbit will not derail the wider forces that make the space sector appealing, whether it’s increased demand for data, geopolitical competition or the increased involvement of private companies.”
This view is shared by James Bruegger, chief investment officer for Seraphim Space, who says increasing amounts of capital are being deployed into two contrasting elements of the space tech ecosystem.
“Firstly, the in-orbit economy – everything from manufacturing in space through to new space stations and even lunar exploration – is now really beginning to take off. Secondly, we are seeing an increase in the number of ‘downstream’ deals being done in software companies looking to use space data to help industries such as insurance adjust to challenges posed by the climate crisis.”
New high ground
In echoes of the 20th century United States/Russia space race, there is intense competition between the US and China, and as geopolitical tensions between the two superpowers intensify, so the opportunities for investors increase.
Bailey says: “The coming decades will be defined by geopolitical contest between China and the USA. During the Trump administration, there was a shift towards viewing China as a strategic competitor. Space is a core part of this competition. Leadership in space technology is increasingly viewed as a strategic priority for both countries. The US refers to advantage is space as ‘the new high ground’.”
China has stated its intention to become a “space power” with President Xi Jinping declaring that China’s “space dream” is to take the place as the world’s leading space power by 2045.
“This will only further spur on US efforts to maintain its edge,” Bailey adds.
Opportunities for investors to enter the space tech sector are expanding beyond the special purpose acquisition companies (SPACs) that so dominated financing in the previous two years.
David Ho, a Clifford Chance associate in Singapore, says SPACs have “almost completely fallen away” adding: “Start-ups are now turning to debt financing and project financing. Asset financing also remains on the table and listed companies are expanding into the space sector.”
Bailey agrees and says: “There is no lack of publicly listed firms in the space sector”.
“Take the example of the recent Artemis launch [the NASA programme to return astronauts to the moon]. There were many contractors across the space industry that made this possible, many of which were publicly listed and included in YODA’s portfolio. This spanned from well-known blue chips such as Boeing and Lockheed Martin to much lesser-known, smaller and recently listed companies like L3Harris Technologies.”