Spacefaring Dreams May Be Reality

These impossible dreams are slowly getting closer to real life. In 2022 I wrote a column anticipating that the space industry was on the eve of exciting developments and they have now begun. Branson’s Virgin Galactic has been flying regular commercial flights in 2023. NASA’s Artemis¹ uncrewed Moon-orbiting mission marked the agency’s return to lunar exploration. Musk’s SpaceX company has continued testing its large Starship rocket, designed for human spaceflight. And India has landed a spacecraft on the Moon for the first time.

There’s mounting competition to push further into space. Indeed, the Artemis² project is due to fly four astronauts past the Moon in 2024: the first crewed flight to the planet since the Apollo 17 mission in 1972. Artemis eventually plans to build a permanent Moon base as a possible prequel for colonizing Mars. Other space stations are planned, some with commercial uses, and China has ambitious plans to use its Tiangong station to further its space ambitions.

These are exciting times for those who believe in what Musk describes a “spacefaring civilization” on the pages of his SpaceX website, drawing parallels with the age of seafaring explorers. But Musk and his fellow billionaires are not just explorers, they are also businesspeople investing in the dawn a new space age. With encouraging signs that some of the private companies leading space exploration will soon be listed on public stock markets, this chance should soon be open to all investors.

That’s exactly what our VanEck Space Innovators UCITS ETF has been waiting for. Started in June 2022, the ETF is currently mainly invested in the satellite industry. These companies themselves are benefiting from the shrinking costs of access to space, as the private sector has injected new dynamism to the industry. If more futuristic companies come to the stock market, though, our ETF is likely to invest in them as well due to the design of the fund’s investment strategy.

We think there are three big themes under way in the industry. First is space colonization, as illustrated by NASA’s Artemis project. As well as the US, the countries of China and Russia are planning a base on the Moon, which may signal a new space race as geopolitical rivalries spread to the galaxy. Second is Space mining, which would provide the raw materials needed for building. Third comes tourism which Virgin Galactic, already a VanEck Space Innovators UCITS ETF holding, has shown is a growing if young market.

The space industry is predicted to increase its revenues from $366 billion in 2019 to $1.4 trillion by 2030, according to estimates from Bank of America. Money has already poured into the sector. In the 12 months to the end of the third quarter of 2023, some $5.6 billion was invested into private Spacetech companies, according to the Generation Space Index. Notably, the amount invested is recovering after a decline in 2022, and the return of investment in large growth companies suggests growing investor confidence.

Of course, the satellite sector should share in the space industry’s overall growth, but our ETF might soon be able to access some more futuristic companies as well. This is because they are getting increasingly mature and are unlikely to go public via SPACs (special purpose acquisition companies), which are losing favor. That raises the prospect of some large private space companies being listed directly on stock markets through initial public offerings (IPOs). Indeed, Musk’s famed Starlink satellite company is rumored to be considering an IPO.

It’s important to say that these companies – like all pioneering innovators – are higher risk. But the space industry’s star-gazing enterprises have enormous growth potential, and as more look likely to list on public equity markets now could be a good time to buy. Indeed, the price of our ETF has recently fallen slightly, which makes it less expensive than it was earlier in 2023.

Preparing for Lift-Off? Performance of VanEck Space Innovators UCITS ETF

Past Performance of Hypothetical $100 Investment  as of 29 Nov 2023

Performance quoted represents past performance. Current performance may be lower or higher than average annual returns shown. Discrete performance shows 12-month performance to the most recent quarter-end for each of the last 10 years where available. E.g. '1st year' shows the most recent of these 12-month periods and '2nd year' shows the previous 12 months period and so on. Performance data for the Irish domiciled ETFs is displayed on a Net Asset Value basis, in Base Currency terms, with net income reinvested, net of fees. Returns may increase or decrease as a result of currency fluctuations.

For me, space has been a fascination ever since I read the Isaac Asimov Foundation sci-fi series of books as a teenager. I closely follow the endeavors of spacefarers like Musk, Bezos and Branson as they embrace the challenge of making impossible dreams reality.

Those impossible dreams may soon look like an inevitability.