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.
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.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
