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SpaceX President Prefers Space Tugs Over Small Rockets

By Rich Smith - Nov 18, 2020 at 7:07AM

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Would you rather you invest in a limited market, or in "perfect market opportunity?"

Euroconsult's World Satellite Business Week Virtual event just might have been the most important conference that space investors never heard of. 

Held last week entirely online, this conference brought together high-level executives from all the major space companies -- United Launch Alliance, Arianespace, SpaceX, Blue Origin, International Launch Services, and Mitsubishi Heavy Industries besides. They all got together to talk shop last week -- and to talk smack about their small rocket-launching competitors. And if you are interested in investing in space stocks, there were two big takeaways you need to be aware of. 

Northrop Grumman's MEV-1 space tug over Earth.

Image source: Northrop Grumman.

Small rockets, small opportunities

For the past few years, we've been looking expectantly at the wave of new companies offering to launch small satellites into orbit atop small rockets, and wondering which of them will be the first to IPO. The almost unanimous verdict of the big space bosses meeting at Euroconsult's online shindig: Very few of these companies are actually going to succeed.

"There is ... room for ... two, maybe three of these micro launchers" to survive in a market dominated by large rockets, says SpaceX COO Gwynne Shotwell, whose company last year announced a small satellite rideshare program that bundles multiple customers' payloads aboard a single large rocket launch, and sends them to orbit for an unbeatable price

As ULA CEO Tory Bruno explains, "the fundamental challenge is dollars per kilogram," and by that metric, it simply costs a lot more to launch a single small rocket with a single small satellite than it does to launch a single large rocket bundling many small satellites aboard it. "While it is disheartening" to say so, laments Bruno, "a huge number of start-ups for micro launchers" are going to be "destroyed" and "that market [will not] recover."

Ultimately, ILS president Tiphaine Louradour muses that micro launchers may be relegated to "addressing more of a government need" for last-minute launches of payloads to unique orbits.

And Arianespace CEO Stephane Israel agrees, pointing out that "there is only one micro launcher successful today" (New Zealand's Rocket Lab) and "its success is linked to the DoD," which needs -- and is able to pay extra for -- "quick and responsive access to space."

In short, if there is an opportunity for small rocket launchers like Rocket Lab, Virgin Orbit, or Mark Cuban-backed Relativity Space to IPO, the window of that opportunity may be closing fast. And investors eyeing such IPOs should carefully consider carefully whether they really want to try to climb through that window.

Space tugs are sexier than they sound

So if not small rocketships, what should investors be looking to invest in instead? Well, as it turns out, one of the executives at Euroconsult's confab had some thoughts on that too.

You see, it may be more economical to bundle many small satellites aboard a single rocket in a rideshare launch -- but that still leaves a problem: Once the rocket gets them into orbit, how do they get into the right orbits? How does each individual satellite get into the specific orbital trajectory that its customer paid for it to reach?

And the answer to that question may be: Space tugs.

Also known as "orbital transfer vehicles" or OTVs, Gwynne Shotwell, the SpaceX COO, noted that this part of the ground-to-space-to-final orbit continuum could be a "perfect market opportunity." SpaceX believes that its gigantic Starship reusable spacecraft (still under development), which is designed to be refueled in space, can fill this need. But the company is also partnering with privately held Momentus (which will soon be publicly traded after merging into Stable Road Acquisition Corp (SRAC)) to tow satellites, carried to orbit by SpaceX Falcon 9 rockets, into their final orbits.

Another company aiming to do the same kind of business is Northrop Grumman (NOC -1.96%), which is a publicly traded stock and has two such space tugs (MEV-1 and MEV-2) already in orbit. And a third is Spaceflight Inc., which is part-owned by publicly traded Japanese industrial giant Mitsui & Co. -- and also partners with SpaceX on rideshare missions. Just last week, Spaceflight announced plans to launch its first "Sherpa-FX" electrically powered space tug in mid-2021. 

So right there, dear investor, you've got two new space investing ideas to work with, and a bonus third just as soon as Stable Road finishes IPO'ing Momentus.

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