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Morgan Stanley’s Third Area Summit Occasion: Investing To Take Away

SpaceX’s crew Dragon Endeavor was docked with the International Space Station on July 1, 2020.

NASA

Morgan Stanley held its annual space summit practically this year due to the coronavirus pandemic, but analyst Adam Jonas told CNBC that hundreds of investors and observers attended the event on Tuesday as interest in the space industry booms.

Known on Wall Street for his early calls to Tesla, Jonas has studied the fast-growing space industry.

Here’s what space investors learned at Morgan Stanley’s Third Space Summit:

  • The event was attended by 20 space companies, including HawkEye 360, MDA, PredaSAR, Planet Labs, Spire Global, Blue Origin, Virgin Galactic, Telesat, ViaSat, SES, Virgin Orbit, ABL Launch Systems and Rocket Lab.
  • Government officials also spoke – including from the US Space Force and the Department of Commerce – that national security remains a critical part of the space economy.
  • Industry executives view SpaceX’s dominance and growth as “net positive” for the industry.
  • SPACs, or special-purpose acquisition companies, have been a popular discussion point and are seen as a way for space companies to gain access to public markets.
  • The launch window for the next Virgin Galactic space flight test will open on December 11th and will run through December 24th. The New Mexico weather is the only obstacle to the start of the flight at the top of the window.

SpaceX is a “net positive” for the growth of the industry

While Elon Musk’s SpaceX was not on the agenda despite an invitation from Morgan Stanley, Jonas noted that the event occurred as the company prepared for a high-altitude test of its Starship prototype rocket. He described SpaceX as “the front runner” in the growing space industry, although the company doesn’t necessarily need the added presence of a Wall Street event – highlighted by SpaceX’s nearly $ 2 billion fundraiser in August.

For the other space companies aiming for growth in the industry, event attendees said that SpaceX is both gobbling up market share and fueling the flames for more growth with beneficial ripple effects.

“SpaceX is a net positive because it grows the cake and shows investors what is possible,” Jonas said.

Jonas also said Morgan Stanley sent an observer to South Padre Island, Texas, to see SpaceX’s Starship SN8 test flight. He believes that SpaceX’s development of Starship will continue to be one of the top objects in 2021.

The spacecraft’s prototype SN8 rocket fires two Raptor engines as it attempts to land after its high altitude test flight on December 9, 2020.

SpaceX

Jeff Bezos’ space company Blue Origin was represented at the summit notably by the company’s Vice President Clay Mowry, who highlighted 2021 as a big year for the company. According to Jonas, Mowry currently has around 3,500 employees, according to Blue Origin.

“The fact that [Blue Origin] was on the agenda and the willingness to get involved is perhaps a symbol of where they are on the company’s operations and growth path, “said Jonas.

Blue Origin is preparing for milestones next year in each of its four main programs: test flights of the New Shepard tourism rocket, first launch of the New Glenn heavy-lift rocket, start of delivery of ready-to-fly BE-4 engines and a potential major NASA award for its manned lunar lander system.

The “SPAC Phenomenon”

Virgin Galactic leaders in front of the New York Stock Exchange, from left: CEO George Whitesides, Founder Richard Branson, and Chairman Chamath Palihapitiya.

Virgo Galactic

Jonas highlighted SPACs, or acquisition companies for special purposes, as a popular discussion point at the summit. Two space companies have taken the SPAC route to gain access to public markets. Sir Richard Branson’s tourism company Virgin Galactic made its debut in late 2019, and space transportation specialist Momentus was preparing to go public early next year through a deal with Stable Road Capital.

“The SPAC phenomenon is actually very well aligned with the horizon and type of space investment. It’s a venture capital mindset,” said Jonas.

He described the SPAC approach as “democratizing venture capital and private equity,” which now “coincides with a major drag on interest in space investments for all of our clients, both institutional and private.”

“It’s the ultimate frontier of investing and the human species at the same time,” added Jonas.

Weather the variable for the next Virgin Galactic test

Virgin Galactic’s carrier aircraft releases its Unity spacecraft during a glide test.

Virgo Galactic

Michael Colglazier, CEO of Virgin Galactic, and Jon Campagna, CFO also spoke at the summit. The company’s next space test was the main topic of discussion. The Virgin Galactic launch window will open on Friday, December 11th and will run through December 24th. According to Jonas, the weather at Spaceport America in New Mexico is the only obstacle to the start of the flight at the beginning of the window.

Colglazier also gave more context at the summit on how Virgin Galactic plans to achieve its goal of flying 400 flights per year per spaceport. It’s a goal Colglazier previously said the company would have up to $ 1 billion in annual revenue per spaceport.

“You want to do two flights a day, sometimes 200 days … that’s 400 engines,” said Jonas. “And [Virgin Galactic] described the [engine manufacturing] So, as a slow moving assembly line, there could be an entirely different paradigm when engines of this amount are made. “

Jonas summed up Colglazier’s message as follows: Once Virgin Galactic finishes its campaign with three test flights, the final of which will be Branson, the company must move into a phase of scaling up its manufacturing and operations.

“At a high level, 2021 will be a year where you will see both the hype / excitement and the implementation of the industry / trade plan,” said Jonas.

Colglazier did not provide an update on the timing of Branson’s flight, which Virgin Galactic had scheduled for the first quarter in November. Jonas noted, however, that Colglazier said COVID-19 shutdown orders in New Mexico cost the company about a month between the time of the first and second of the three upcoming test flights.

“I think the Branson flight is really very important. I think we may underestimate how important it is,” added Jonas. “It will be very important to make it look real and then start a wave of private astronauts who want to do this before anyone else does.”

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