Investors looking to access the growth of the space economy, particularly by tapping into the SpaceX initial public offering (IPO), should be aware this is still a developing sector and stocks will remain volatile for some time, Betashares senior investment strategist Cameron Gleeson has warned.
Gleeson noted the development of space and the technology to access it was no longer restricted to government agencies, leading to a burgeoning new sector that had pushed some stocks to the fore.
“Over the past decade, we’ve witnessed the emergence of a genuine, commercially driven space economy – one that is expanding rapidly and generating growing revenue from activities such as launch services, satellite manufacturing, broadband connectivity and Earth observation,” he said.
“Forecasts from McKinsey & Company and the World Economic Forum suggest the global space economy could grow to US$1.8 trillion by 2035 as falling launch costs and the emergence of low Earth orbit satellite constellations have expanded the commercial opportunities that are possible in space.
“SpaceX has become the defining story of the potential of the space industry.
“From reusable rockets that have dramatically driven down the cost of access to space, to Starlink’s rapid growth into a global satellite broadband network, SpaceX has demonstrated just how transformative and commercially compelling this sector can become.”
He recognised SpaceX was likely to list on the Nasdaq index in early June as the largest IPO in history, reflecting the value investors and the markets see in the space economy, but noted this optimism should be tempered with caution given the early-stage growth of the sector.
“Investors should be clear-eyed about exposure to this sector. The space economy is still nascent and with that comes volatility,” he added.
“Individual companies can be subject to significant share price swings driven by idiosyncratic company risks that are impossible to predict for individual investors.
“Rather than taking a concentrated bet on a single stock, investors should look to diversified exposure across the space value chain through a single trade – satellites, launch vehicles, ground systems and enabling technology – all in one portfolio.
“Some other notable space company examples include AST SpaceMobile, which has signed major agreements with US telco providers such as AT&T and Verizon to provide direct satellite-to-mobile connectivity, while Planet Labs provides continuously updated satellite imagery of the Earth to government and commercial enterprises.
“The space economy is an exciting long-term opportunity and we believe the proposition is best captured through appropriately sized, diversified exposure to the sector.”
Betashares is providing access to the sector via its Space Industry ETF (exchange-traded fund), which has the ASX code RCKT. Space-related ETFs manage about $9.5 billion in funds under management and have attracted around $5.3 billion in flows since the start of the year.