Why space investments are the way to go for investors

Space investments and different planets with currencies suspended in air

(Image credit: Getty Images)

published 14 March 2024

In the wake of Jeremy Hunt’s Budget last week a small group of people on one of the UK’s most northerly islands were celebrating. Unst, part of Shetland, is home to the UK’s most northerly cafe, postbox and cake fridge (this is a Shetland thing). It also boasts the advanced construction site that will be the UK’s most northerly spaceport. In his Budget Hunt awarded that port, SaxaVord, £10million.

More good news came this week when HyImpulse, one of two German firms contracted to launch from SaxaVord, was granted a licence to do so by the UK Civil Aviation Authority (SaxaVord itself was awarded its own spaceport licence last year). HyImpulse should now see its first hybrid rocket, designed to use both liquid and solid propellants (a combination that should make it simple, safe and easy to control), launch later this year. If it works, says HyImpulse’s CEO, it will be a “gamechanger in getting small satellites into orbit”.

This might all sound a little niche. It isn’t. There are a good 8,000 satellites in orbit around the Earth at present and there should be more than 30,000 up within the next five years. The space race is partly about who gets to get those satellites up there. Being the UK’s premier vertical launch site and having clients such as HyImpulse is a big deal.

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You’ll be wondering what all those satellites do. The answer, as Tim Marshall points out in his must-read book The Future of Geography, is almost everything. Think of both low-orbit and geosynchronous orbit (higher up – and where satellites turn at the same speed as the Earth) as part of our geography (in the same way as the oceans) and the satellites themselves as part of our critical infrastructure (in the same way as our Earth-based transportation and energy systems).

They monitor weather and climate, they collect and distribute vast amounts of data, run your GPS – and that of the tankers moving goods and oil around the world, with applications so diverse and embedded in our lives (I’m tracking my children on their way home from school via a satellite-enabled app as I type) that we’d be paralysed without them.

They relay a rising proportion of our communications, service other satellites and even clean up space by grabbing bits of debris out of orbit. And that’s all before we start talking about the potential for our new geography to change defence (lasering each other’s satellites from space or from the ground, managing drones, spying, and so on). In future, we will colonise the Moon; we will mine asteroids for precious metals; and we may well get free and infinite solar energy beamed from space – just not yet. However, to dwell on the “not yet” is to miss the now – and how dependent on space we are already. Were the satellite network suddenly to disappear, says Marshall, it would be an “almighty blow” to us all.

How to invest in SpaceX

So how can you get access to your own small bit of space? The simplest way is to look to the big UK-listed trusts that hold stakes in Elon Musk’s unlisted SpaceX such as Edinburgh Worldwide Investment Trust (LSE: EWI), where it makes up 10.8% of the assets; Scottish Mortgage Investment Trust (LSE: SMT, 4%); Baillie Gifford US Growth Trust (LSE: USA, 7.8%); or the Schiehallion Fund (LSE: MNTN, 7.2%).

SpaceX makes much of its very exciting plans for the future (the ultimate goal being to enable people to live on other planets), but for the moment, says Baillie Gifford, “makes most of its revenue from launching satellites into orbit for government and corporate customers”. Holding a trust that holds SpaceX, then, gives you access to the sharp rise in satellite launches. Which one? In an interview last week Nick Greenwood, manager of the MIGO Opportunities Trust, suggested Schiehallion, less for the exciting slice of space than for the massive discount to net asset value, or NAV (45%), at which it has been trading.

There was a time a year or so ago when the market wasn’t sure it could trust the stated NAVs of trusts holding early stage unlisted investments, says Greenwood. But that time has passed: they have been checked and checked again. There is also more visibility within the portfolios of who the winners and losers are likely to be.

But if you are going down that route – early stage private investments held inside a trust trading at a whopping discount – you might as well go full space with the Seraphim Space Investment Trust (LSE: SSIT), on a discount to NAV of 46%. I wasn’t keen on it when it launched in 2021. I thought it was a bit too early into the sector; that its investments were overpriced; and that its performance fee was, and remains, too high. But today, the case for space is largely made. The main companies have real momentum behind them (the top five now make up over 50% of the portfolio), and the trust is much cheaper. The share price has fallen by around 50% since the launch.

Risks remain. The market capitalisation is tiny (£124million), not enough for the wealth managers to buy in; the portfolio is very concentrated (17 companies); and there is always risk in investing in a portfolio of unlisted minority shareholdings. Remember, this isn’t just space investment, it is private-equity space investment.

But it is almost worth taking a small holding just to make sure you keep an eye on the sector. And at the very least you should explore the portfolio. If you are wondering what space can do for us, a look at the likes of Taranis, which can provide farmers with “submillimeter image resolution of every acre”; Altitude Angel, which is building cloud technology to integrate drones into global airspace; and Astroscale, which is working on a prototype to refuel military satellites while in orbit, should give you a clue.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.