Space, the final frontier, is now accepting your dollars for investment. In June, SpaceX plans to offer an unusually large allotment of its IPO to retail investors so they can participate before it goes public in what is being billed as a once-in-a-lifetime, generational money-making opportunity. Should you be looking into this opportunity, or is caution warranted?
Let’s explore both sides of the conversation and try to not end it too ambiguously as to provide any value.
The allure of space is as vast and interesting as the Hubble eye can see. The cost-cutting structure of SpaceX, and now others inspired by it, has essentially dismantled the logic of giving NASA the job of pushing space technology and exploration forward. We also have a cultlike figure in Elon Musk, the Thomas Edison of our time, who lands rockets backwards. He has repeatedly shown the ability to take on complex problems and radically accelerate their development.
Humans are explorers. When times get rough or uncertain, we tend to push harder toward the horizon. That creates a perfect recipe for SpaceX to go public and raise billions to further its mission of interplanetary travel. The entire space industry, travel, mineral and resource exploration, satellites, and military applications is likely to expand dramatically in the decades ahead.
It’s no wonder that in my 27 years of following markets I have never seen this level of excitement around a single idea. And that right there gives me pause.
Most of the time, the best investments going forward are not the ones being screamed about by a hungry crowd. Usually, when the crowd is so hungry they would break into the restaurant, you sell them all your food. Many space-related investments already in the market posted exceptionally high returns last year in anticipation of this moment.
It also worries me that SpaceX, for the first time in history, is offering a large allotment of stock to retail investors. However, I suspect it will not be easily accessible when the global roadshow to accredited investors begins. The potential fees and lockup periods attached to these shares may not give investors as clear a shot at capitalizing on the frenzy as it might first appear.
SpaceX will win big with the capital it raises. The promoters of these shares will likely win big selling them to the public. But will the investment go well for those buying the pre-IPO shares, or for those purchasing the stock in the first days of trading?
Elon Musk has a long history of overpromising on timing. He has not always delivered on schedule, and sometimes his ventures succeed only after delays and complications.
Remember, the internet did change society, but it was also declared dead after the tech wreck. Major technological breakthroughs often move through booms and busts before settling into long-term success. Musk’s vision of the space economy may ultimately prove correct, but the investment path could still be messy. New generations of companies often emerge later and buy the bankrupt infrastructure of early pioneers for pennies on the dollar, then scale it profitably.
At Stewardship Capital, we do invest in areas we find exciting and have conviction in. It would not surprise us if we eventually own parts of the space race or related infrastructure and possibly even SpaceX, directly or indirectly, when the timing feels right.
My advice is to tread carefully. If you feel compelled to participate in some form or fashion, make it a small percentage of your overall portfolio. Be prepared to lose most of it. With the right-sized position, that will not be the end of the world. And if the investment succeeds to the degree you hope, it will simply be a welcome boost to your portfolio.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)