Elon Musk Enters the Satellite Race

Guild Investment Management  |

In the past several weeks there were two big setbacks for private space flight. On October 28, an Orbital Sciences launch ended in an explosion, destroying its satellite cargo; and three days later, Virgin Galactic’s experimental low-orbit passenger craft broke up and crashed during a test flight over California. The psychological impact will probably delay the launch of commercial Virgin Galactic flights for an indefinite period. Orbital Sciences’ stock (ORB) has fallen nearly 20 percent.

Unscathed by the bad news is Elon Musk’s private spaceflight venture, SpaceX. The SpaceX Falcon 9 rocket has been a workhorse for cargo flights to the International Space Station, and the company is working on the capability to transport astronauts.

After a report by The Wall Street Journal, Musk confirmed through his Twitter account that SpaceX is incubating a new project: microsatellites for global internet. This will add them to the list of big tech names pursuing strategies for worldwide broadband provision -- including Google (GOOG) and Facebook (FB) , strategizing to use balloons and drones.

There seems to be a new “internet space race” developing to bring broadband internet access to underserved parts of the planet -- and ultimately, to bring cheaper broadband access to people everywhere.

Musk’s project, although several months away from an official announcement, will be focused on a less outlandish technology than the ones being pursued by its rivals. The proposal is for SpaceX to team up with the founder of internet satellite startup 03b, Greg Wyler. Wyler has also worked with GOOG on similar technology in the past, but left the company citing GOOG’s lack of manufacturing experience.

The new venture would see SpaceX launching some 700 micro-satellites, each about half the size of the smallest communications satellites currently in service, with Wyler’s partner company WorldVu manufacturing them for about a million dollars each. Sources suggest the project’s total cost would be about a billion dollars. Musk confirmed the discussions, but noted that the Journal’s description was “wrong on several important points.”

Musk’s track record as an entrepreneur, SpaceX’s track record as an efficient and reliable commercial spaceflight company, and the relative conservatism of this project compared to the more edgy proposals of GOOG and FB.

We anticipate that despite the setbacks we saw in October, commercial spaceflight will continue to make headway.

Entrepreneurs like Musk will democratize space by lowering costs far below what any government space agency can provide.

Investment implications: Commercial spaceflight is economically promising, but remains risky. It’s not yet time to seek direct exposure to the space. Watch new entrants carefully and stay abreast of technical developments; we’ll let you know our favored picks as the industry matures.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
FB Facebook Inc. 132.43 0.88 0.67 41,862,553 Trade
GOOG Alphabet Inc. 1,025.76 5.76 0.56 2,400,953 Trade


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