Cathie Wood’s ARK Innovation sees space as the next frontier for ETFs
Link copied to
Interest in space stocks – companies with products that are literally out of this world – has been growing steadily thanks in no small part to the success of Elon Musk’s SpaceX and now exchange-traded fund (ETF) investment in these pioneering plays is poised to explode.
And the fingers are pointed at well-known disruptive technology portfolio manager and Tesla believer Cathie Wood, who is now planning to launch a new space focused ETF.
Wood clearly has her fingers on the technology pulse if her flagship ARK Innovation ETF near 150 per cent gain last year on the back of its biggest component, Tesla, rising more than 740 per cent, is any indicator.
This strong performance means that investors are now whipping out their chequebooks to snap up shares in space companies that could find their way into Woods’ new ARK Space Exploration ETF.
While SpaceX itself is privately-held and has no shares available for any intrepid investor or ETF to acquire on the market, there are several other companies that are on their radars.
Space tourism pioneer Virgin Galactic hit a high of $US33.40 on Thursday, up 21.4 per cent from the previous day while fellow pure space play Stable Road Acquisition jumped nearly 30 per cent to $US22. Just on news of Woods’ interest.
Virgin Galactic counts maverick business magnate Sir Richard Branson as one of its founders and seeks to open up space for tourists along with developing ultrafast hypersonic planes that will drastically reduce travel time.
The company’s commercial spacecraft is air launched from specialised carrier airplane and seek to provide suborbital spaceflights to space tourists.
Stable Road, which is acquiring space transportation company Momentus, is developing space tugs that will deliver satellites to their final destination before collecting used cargo that can be repurposed or reused rather than be left in orbit as debris.
Said space tugs will hitch a ride on other rockets such as SpaceX’s highly successful Falcon 9.
Other potential companies are US defence contractors with exposure to launch systems or satellites such as Northrop Grumman and Lockheed Martin.
Space is a fast growing sector that is driven by growing demand for Earth observation imagery, satellite communications and exploration.
According to ResearchandMarkets.com, the global small satellite market is projected to grow from $US2.8bn in 2020 to $US7.1bn in 2025.
Much of this growth is fuelled by the use of small satellites for efficient Earth observation and tracking of weather phenomena as well as its use for broadband communications.
SpaceX is one of the leaders in the latter with just under 900 satellites launched out of its planned initial constellation of 12,000 satellites. This is just the first stage of its plans with filings submitted for 30,000 additional satellites.
While the Australian space sector is still tiny compared to its US counterpart, there are still a number of ASX small caps who are looking to make an impact.
In December, Kleos Space (ASX:KSS) signed a new evaluation agreement with the Chilean Air Force on the analysis of geospatial information data from the company.
The Chilean Air Force will participate in testing and evaluation of Kleos geospatial RF data collected by its first cluster of satellites for a three month trial period that will begin once the data is made available.
This will facilitate research on Kleos radio frequency spatial geolocation data and methods of collaboration to develop an added value proposition for current and future opportunities.
Kleos’ first cluster of four satellites was launched in November last year and is progressing towards data and revenue delivery.
Defence contractor Electro Optical Systems (ASX:EOS) also continues to progress its SpaceLink satellite communications system which will Medium-Earth Orbit (MEO) satellites.
These will provide high bandwidth and security, low latency while avoiding the limitations of geosynchronous equatorial orbit and low earth orbits.
EOS expects the first constellation of MEO satellites to be launched and be operational in 2024.
It has projected a net present value of $US1bn and internal rate of return of 20 per cent for each constellation.
XTEK (ASX:XTE) is looking to leverage its processing technology that allows it to make things lighter and stronger for use in the space industry while Sky and Space (ASX:SAS) remains in suspension as it heads towards an annual general meeting seeking shareholder approval for its recapitalisation and proposed re-listing.