Investment

Can space investment become cool again?

Published

1 year ago

August 26, 2023

The once high-flying space finance sector has come crashing back to Earth. Two years ago, startups were raising large rounds or going public through mergers with special purpose acquisition companies, or SPACs. There seemed to be no shortage of funding for companies working on capital-intensive efforts like launch vehicles or satellite constellations.

The outlook is now much grimmer. For example, on Aug. 1, Virgin Galactic reported quarterly losses of $134.4 million on just $2 million in revenue and cautioned that revenue would remain low even as its SpaceShipTwo spaceplane begins commercial suborbital flights. The same day, Earth imaging company Planet said it was laying off more than 100 employees, or 10% of its workforce, as the company struggled with “increased cost and complexity” linked to rapid growth after going public through a SPAC.

As Planet and Virgin Galactic made their announcements, a panel of investors discussed the state of financing space companies at the International Space Station Research and Development Conference in Seattle. The wave of investment the industry saw two years ago has come and gone, and likely won’t come back soon, they concluded.

“We saw a little bit of a fad developing around space in 2020 and 2021, where we had ‘tourist’ investors come in because it was cool,” said Mislav Tolusic, co-managing partner and chief investment officer of Marlinspike Partners. “Now AI is cooler than space.”

Lewis Jones, an investment associate with Generation Space, the U.S. arm of British venture firm Seraphim Space, noted higher interest rates played a role. “Generalist investors much prefer to invest and get 5% on Treasury bonds versus risky startups,” he said. “We’re seeing fewer generalist investors in this market.”

The industry is also dealing with the hangover from SPAC deals. “It played out in an unproductive way for the space sector in ’21 and ’22,” said Tom Gillespie, managing partner of In-Q-Tel. “It wasn’t the best vehicle for some of those companies to go public. We’ll see less of that going forward.”

Tolusic, though, saw one benefit of the SPAC deals. “It pruned a lot of the investors who, quite frankly, didn’t know how to invest in space. They didn’t understand how hard it is and what are the things to look for when you invest in those companies.”

The capital available to space companies is significantly less than a couple years ago, but there are still opportunities. Gillespie noted that early-stage investment remains strong, citing the example of an unnamed startup raising an oversubscribed Series A round that In-Q-Tel is participating in.

It’s more difficult, though, for later-stage companies seeking to raise more money, he said. “Even the best companies that are getting funded right now, a good outcome is a flat round” that keeps its valuation unchanged, he said.

The good news is that there are signs of an uptick in industry investment. Jon Lusczakoski, vice president at AE Industrial Partners, said a lot of venture capital is tied up in companies that have, on paper, generated a return for those funds, but still need an exit — a merger or acquisition, or going public — to secure those returns and reinvest the money.

“The rest of 2023 will be similar to what it has been so far this year, relatively flat,” he said. “Then in 2024 we’ll start to see more of a pickup as more capital gets out there and gets deployed.”

There’s likely to be more bad news in the near term, though, as companies struggle to raise money. Companies that went public through SPAC deals are, in some cases, running out of cash or face the risk of delisting from stock exchanges as their share prices plummet.

“There are some short-term challenges here,” said Gillespie, such as a lack of exits. “In the long term, I think this is a really interesting industry. It’s going to keep growing.”

It’s also, Tolusic said, arguably more important than the industries now considered cool by investors like AI. “We’re building something that is a lot bigger than figuring out how to spot a cat inside a picture.”

This article originally appeared in the August 2023 issue of SpaceNews magazine.

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Investment

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

Published

3 days 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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