Morgan Stanley held its annual space summit virtually this year due to the coronavirus pandemic, but analyst Adam Jonas told CNBC that hundreds of investors and observers participated in the event on Tuesday as interest in the space industry booms.
Jonas, known on Wall Street for his early calls on Tesla, has been looking at the fast-growing space industry.
Here's what space investors learned at Morgan Stanley's third space summit:
- The event featured 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 representatives also spoke – including from the U.S. Space Force and Department of Commerce – as national security remains a critical piece of the space economy.
- Industry executives view SpaceX's dominance and growth as a "net positive" for the industry.
- SPAC's, or special purpose acquisition companies, were a popular discussion point and are viewed favorably as a way for space companies to access the public markets.
- The launch window for Virgin Galactic's next spaceflight test opens on Dec. 11 and runs through Dec. 24, with weather in New Mexico the only impediment to launching the flight at the beginning of the window.
SpaceX a 'net-positive' for the industry's growth
While Elon Musk's SpaceX was not among those on the agenda despite an invitation from Morgan Stanley, Jonas noted that the event happened as the company prepared for a high-altitude flight test of its Starship prototype rocket. He described SpaceX as "the apex player" in the growing space industry, with the company not necessarily needing the extra exposure of a Wall Street event – highlighted by SpaceX's near $2 billion fundraise in August.
For the other space companies seeking growth in the industry, Jonas said event attendees acknowledged that SpaceX is both eating up share of the marketplace while also fanning the flames of more growth, with beneficial ripple effects.
"SpaceX is a net positive because it's growing the pie and showing investors what is possible," Jonas said.
Jonas also said that Morgan Stanley sent an observer to South Padre Island in Texas, to watch SpaceX's Starship SN8 test flight. He believes that SpaceX's development of Starship will continue to be one of the top items to watch in 2021.
Jeff Bezos' space venture Blue Origin was notably represented at the summit by the company's vice president Clay Mowry, who highlighted 2021 as a big year for the company. According to Jonas, Mowry said that Blue Origin now has about 3,500 total employees,.
"The fact that [Blue Origin] was on the agenda and willing to engage is maybe symbolic of where they are in the company's operating and growth trajectory," Jonas said.
Blue Origin is preparing for milestones next year in each of its four major programs: Test flights by tourism rocket New Shepard, heavy lift rocket New Glenn's first launch, beginning deliveries of flight-ready BE-4 engines, and a potential major NASA award for its crewed lunar lander system.
The 'SPAC phenomenon'
Jonas highlighted SPAC's, or special purpose acquisition companies, as a popular discussion point at the summit. Two space companies have gone the SPAC route to access the public markets, with Sir Richard Branson's tourism company Virgin Galactic debuting in late 2019 and space transportation specialist Momentus 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 nature of space investing … It's a venture capitalist mindset," Jonas said.
He described the SPAC approach as a "democratization of venture capital and private equity," which is now "coinciding with a major inflection of interest in space investing across all of our clients – both institutional and retail. "
"It's the final frontier of investing and the human species at the same time," Jonas added.
Weather the variable for Virgin Galactic's next test
Virgin Galactic CEO Michael Colglazier and CFO Jon Campagna also spoke at the summit, with the company's next spaceflight test the leading topic of discussion. Virgin Galactic's launch window opens on Friday, Dec. 11 and runs through Dec. 24, with Colglazier saying the weather at Spaceport America in New Mexico is the only impediment to launching the flight at the beginning of the window, according to Jonas.
Colglazier also gave more context at the summit to how Virgin Galactic wants to reach its goal of flying 400 flights per year per spaceport. It's a goal that Colglazier previously said would see the company bring in as much as $1 billion in annual revenue per spaceport.
"They want to get to doing two flights a day, times 200 days … so that's 400 engines," Jonas said. "And [Virgin Galactic] described the [engine manufacturing] as a slow moving assembly line, so there could be quite a very different paradigm when manufacturing engines of that quantity."
Jonas summarized Colglazier's message as: Once Virgin Galactic finishes its campaign of three test flights, the final of which will fly Branson, then the company will need to transition into a period of scaling its manufacturing and operations.
"At a high level, 2021 is going to be a year where you're going to see both the hype/excitement as well as the realization of the industrial/commercial plan," Jonas said.
Colglazier did not give an update on the timing of Branson's flight, which Virgin Galactic in November said was planned for the first quarter. However, Jonas noted that Colglazier said COVID-19 shutdown orders in New Mexico cost the company about a month of time between the timing of the first and second of the three upcoming test flights.
"I think the Branson flight is really, really important. I think we might be underestimating how important," Jonas added. "It's going to be very important to making it look real and then kicking off a wave of private astronauts that want to do this before anyone else does."
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