Investment

Amid economic downturn, space investment plummeted in 2022

Published

2 years ago

January 19, 2023

Enlarge / Sir Richard Branson took to the sky in the summer of 2021. But since then, with no additional spaceflights, Virgin Galactic’s stock has taken a nose dive.

Virgin Galactic

Private investment in the space sector declined by 58 percent in the year 2022, according to a new Space Investment Quarterly report from the firm Space Capital.

The $20.1 billion in private market equity investment last year is the lowest annual total since 2015, said Chad Anderson, the founder and managing partner of Space Capital. While early stage investments were largely unchanged, the large decline came in late- and growth-stage companies.

The report cites several factors for the pullback, including the fastest interest rate hike cycle since 1988, a challenging investment environment, and a continued economic recovery from the COVID-19 pandemic.

However, Anderson told Ars that another factor was the relatively poor returns of space-based companies that have gone public via the Special Purpose Acquisition Company, or SPAC, process, dating to 2019 when Virgin Galactic did so. According to an analysis by SpaceWorks, $100 invested in a “new space” index of stocks in January 2021 would be worth about $15 today, compared to $127 for a traditional space stock index.

SPACs whacked

“The poor performance of SPAC companies has certainly influenced investor attitudes,” Anderson said. “This is just one of several factors influencing investor sentiment, but it definitely is significant. Amid the general pullback in technology investing, space companies are often viewed as a higher risk category, and SPAC underperformers like Virgin Galactic are clearly driving those perceptions.”

Anderson said it typically takes about six to eight years for a company to progress from its initial round of seed funding to an initial public offering of stock. By this yardstick, many of the space companies that have gone public via the SPAC process did so prematurely—not just pre-revenue, but in some cases pre-product.

Some of these companies, such as Virgin Galactic, Virgin Orbit, and Momentus, still lack a viable commercial product years after going public. While these companies may have needed public funding to survive their early development years, this additional scrutiny has made innovating much more challenging.

“It is difficult to build a core product, fail, pivot, and innovate as a public company,” Anderson said. “The public markets prefer operational stability and predictable revenue. It’s no wonder that many of these companies have disappointed.”

Focus on fundamentals

With that said, Anderson believes that some SPAC companies are beginning to demonstrate their viability. Moreover, he said, there are some “incredible” space companies that have been working in the background for several years. These companies will be ready to go public, via a traditional initial public offering, within a few years.

As for other notable tidbits in the report, Anderson called attention to SpaceX’s capital raise of $2 billion in 2022, the company’s second-largest annual raise. SpaceX has sought this additional funding as it has worked to bring two large development projects—the Starlink Internet constellation and the Starship launch system—online.

Enlarge / Investment in the space economy, based on the origin of the investments.

Space Investment Quarterly

China also appears to be closing the gap to the United States in private investing in the space economy, Anderson said. Chinese companies have attracted 35 percent of all Space Applications investments, for example, compared with 41 percent for US companies. This is being driven by China’s e-commerce and location-based services boom.

Looking ahead to 2023, Anderson sees another difficult year for space startups due to the lack of investment capital available for small companies to draw upon. However, he views a shift from “momentum investing” to a greater focus on fundamentals as a positive trend, which will benefit quality space companies in the long run.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

22 hours ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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