There are a limited number of opportunities for investors looking to profit from the renaissance in commercial space.
Billionaire Sir Richard Branson recently announced his Virgin Galactic will merge with the investment firm Social Capital Hedosophia (IPOA), creating the first publicly traded company to offer commercial space travel.
Some analysts see the merger as a new frontier in the billionaire space race.
Ron Epstein, research analyst at Bank of America Merrill Lynch, says once the deal is complete, it will be a “concept stock” for investors.
“Virgin Galactic is just the beginning of a broader story, that I think you’re going to begin to see,” he says.
Billionaire space race
Branson is vying with other billionaires to become the first person to put tourists on a commercial passenger flight to space.
SpaceX, founded by Tesla (TSLA) CEO Elon Musk, and Blue Origin, owned by Amazon (AMZN) boss Jeff Bezos, are both privately held. Epstein believes they are the “obvious candidates” for an IPO, at some point.
Opportunities in space
Until then, investors need to look to contractors – the companies that make the components for the rocket makers – as a way to gain exposure to the purported $1 trillion space exploration industry.
“Boeing (BA) makes the SLS – that’s the space launch system NASA’s going to use for its new moon mission,” Epstein says.
Both Boeing and fellow defense contractor, Lockheed Martin (LMT) are partners in the United Launch Alliance, which manufactures and operates rocket vehicles capable of orbiting spacecraft.
Rival aerospace and defense company Northrop Grumman (NOC) bought Orbital ATK in 2017. It paid $9.2 billion for the leading maker of defense communication systems and satellites to strengthen its position in space research and development.
And Ball Corp’s (BLL) space technology provider Ball Aerospace, recently began on-orbit testing of a non-toxic, green fuel on board a SpaceX Falcon Heavy rocket.
“If you look at the number of small companies today pursuing commercial space, everything from satellite services to CubeSats to launch services, there are literally hundreds and hundreds of them,” says Epstein.
He says the level of venture capital and private equity flowing into space-related companies has quadrupled in the past decade.
While not all of the space start-ups are expected to survive, Epstein says a select few will thrive – and ultimately turn to the public markets – giving investors more ways to get in on the space race.
Alexis Christoforous is co-anchor of Yahoo Finance’s “The First Trade.” Follow her on Twitter @AlexisTVNews.