Which Company Has the Inside Track On Building the Next Space Station? - 7investing
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Which Company Has the Inside Track On Building the Next Space Station?

November 4, 2021

Jeff Bezos’ Blue Origin may get derided as a billionaire’s vanity play, but the reality is that it has a pretty important mission. The company wants to help mankind eventually establish colonies on other planets. That’s a lofty goal that any science fiction fan can relate to and many people would consider it an important one for the future of humanity.

Before heading to Mars, however, Blie Origin has plans to build a space station. The company has thrown its hat into the ring to replace the aging, 20-year-old International Space Station (ISS). The company won’t be doing this alone — it’s likely too big a project for any one company. Instead, Blue Origin will work with Sierra Space, Boeing, and other companies.

This isn’t the only proposal for building a new ISS, but it has to be considered a favorite given the resources Bezos has at his disposal. If this actually happens, it remains unclear as to how Blue Origin will make money on the project. Space tourism will likely play a role in that, but it’s also worth noting that Bezos has kept Blue Origin private and his stated goal for the company has not been making money. Steve Symington joined the Nov. 1 edition of 7investing Now to break down every aspect of what this project could look like.

Building a space station involves an awful lot of moving parts and this could be a major project not just for Blue Origin, but for a lot of smaller players in the space race. Those companies could turn out to be the big winners if Blue Origin wins the right to build a new ISS.

A full transcript follows the video.

 

Dan Kline: Jeff Bezos did something really interesting. And I didn’t even know this was a thing. So why don’t you fill the audience in a little bit on what’s happening and sort of why it matters. There’s sort of a side angle for investors here.

Steve Symington  1:51  Right? And he’ll take credit, obviously, because he basically stepped down as CEO of Amazon (NASDAQ: AMZN) so that he could focus on Blue Origin. And this is his space company. They took Shatner to the low, basically just into microgravity areas, not necessarily space, as we think of it, orbiting like the SpaceX missions. But really interesting that just a couple of days ago, they announced what they’re calling Orbital Reef, it’s a space station, not unlike the International Space Station that they plan to build in orbit, and they’re hoping to have it ready. It’s just a concept right now, so keep that in mind. This isn’t something that is going to be done next year. Probably by the end of this decade. So in the next eight, nine years, we should see this happening.

But it’s a really interesting project. And it’s not just Blue Origin, it’s a bunch of other companies. Sierra Space is maybe the most prominent partner, it’s a privately held company. But also some other small space stocks that popped pretty hard on the news. Redwire (NYSE: RDW) is one of them. RDW I believe is the ticker for that one. But some really, really interesting companies and a lot of businesses that will take part in the production and assembly and creation of this Orbital Reef space station.

Dan Kline  3:13  Boeing (NYSE: BA) is involved as well, but don’t go out and buy Boeing stock. Because as I evaluate Boeing, this is this is just gonna be a few planes helping to get stuff up into the air. This is not a game changer for Boeing.

Steve, I’ve been working on a space station, but it’s made of LEGO. So I’m not super confident it’s gonna be able to be orbital. But that being said, do we need a new international space station? Is there a demand for this?

Steve Symington  3:37  Yeah. And this is something I guess to keep in mind is the International Space Station is 20 years old. And I think, what was it 2030, is when the funding is set to lapse for the space station. They’ll probably renew it. It’s not like they’re gonna waste that because it was like $100 billion dollar project to build the International Space Station.

Dan Kline  3:56  And also, what do you do? Just let it fall to Earth? Let the astronauts run out of food? It feels like you pretty much have to at least have a wind down plan on that one.

Steve Symington  4:06  Yeah. So I mean, it’s not going to go away the International Space Station, but it’s also showing signs of its age. And there were a couple of incidents where there was a misfire on a rocket or something. And it kind of temporarily brought it out of its regular orbit, or not orbit, but its regular rotation. So that was I think, the second emergency situation that they had with astronauts on board this year, I believe. So definitely kind of showing its age a little bit.

But this should be really interesting. Orbital Reef should be really interesting in that it’s kind of a mixed use project. So you’ll be able to, I think the idea is that by then we should have some, orbital space tourism. And then of course, like microgravity research, orbital research projects, scientific stuff, astronauts, all kinds of ways that this can be used. And it won’t just be the International Space Station anymore. So I think this is kind of the next big stage that we’ll see with the the space economy in general. Which is already huge, right? But this is going to be something where we start to see people going to space and doing these sorts of things is more “normal”. Normal as it can be anyway.

So it’s going to be fun to watch, I think, unfold. And right now, we’re going to have a lot of people kind of picking apart these sorts of projects to figure out who are the largest beneficiaries. Especially relative to their current size and growth potential. So, someone might look at Boeing and say, uhhh, I don’t really want to buy that, because they’re involved in this project, obviously. And there’s a lot of privately held space companies that you just simply can’t own a piece of.

But then there’s small companies like Redwire, which I think it has a market cap of just under $800 million. So this is something that could really move the needle for them. As far as space components go. But we’ll also see some consolidation in this space. We had, Simon Erickson and I, our CEO, had a chance to talk with the CEO and CFO of Rocket Lab (NASDAQ: RKLB). Their CEO is Peter Beck, we chatted with him, and he said, there’s gonna be some consolidation in the “space” space, right. And that’s kind of like they acquired a satellite components company, I believe it was called Sinclair Interplanetary last year, and you’re gonna see a lot of those smaller companies get gobbled up by the big players so that they’re not just sourcing out everything they want to be vertically integrated.

Dan Kline  6:40  Steve Blue Origin’s mission isn’t necessarily to make money, it’s to save humanity in a broader sense. And Jeff Bezos, as maligned as he is, is putting a billion dollars a year of his own money into this. Is the money to be made in these smaller companies? They’re going to get paid, whether there’s a monetization plan for the space station, and there’s like a vague monetization plan involving like tourism and bringing astronauts up, and that doesn’t really matter because can’t buy Blue Origin. But is it really all these other innovative vendors that are are going to get paid and going to get their price to build and maintain this type of space station?

Steve Symington  7:15  Yeah, I think a lot of them will fail in the next decade or so, or get acquired just for their technology. And then you’ll just stop hearing about them because they’ll be a part of a much larger business. But there’s a lot of money to be made. And yes, some of the smaller players are going to get paid.

But I think what’s going to be even more interesting to watch is sort of the wealth created in the process. For both investors who can figure out the businesses that can effectively stand alone with their offerings into the space economy. And also the large privately held businesses right now. I’ll be curious to see whether companies like SpaceX for example, Elon Musk’s pet project in space. It’s more than a pet project now, obviously, that’s saying he’s on track to become the world’s first billionaire [trillionaire], because of his stake in SpaceX. I think, it has something like an $80 or $100 billion valuation by itself, and growing, right.

So I don’t know what Blue Origin is valued at. But obviously Jeff Bezos stake in that certainly can’t hurt his wealth. But yeah, the primary goal isn’t necessarily to make money, it’s to build something scalable. And over the longer term, I think the rest will follow for these businesses. But yeah, a lot of money to be made.

Dan Kline  8:28  Steve, last question here. Is taking the space station, which had previously been a government run project and sort of farming it out to private business, and this is not the only plan for an ISS replacement, but it is the most prominent one. Is this just the end of NASA, the end of governments sort of funding these things? Look I like this model, we didn’t have any space innovation for basically our entire childhoods. It was the space shuttle goes up, the space shuttle comes down, and now we’ve had all this sort of massive innovation. So is this really just the final move in this big switch?

Steve Symington  9:04  The Final Frontier you mean? You just missed an opportunity?

Dan Kline  9:08  Star Trek is the most boring of the space shows. Hit me up @worstideas7 and tell me I’m wrong.

Steve Symington  9:15  Yeah, DM Dan, we might have just lost like a quarter of the audience. Anyway, Yeah, I applaud the way this is moving forward from being primarily government-run low priority. How do you make money in this? How do you sustain this? This is how. And when you have commercial companies like Blue Origin, and SpaceX and so many other space-oriented businesses actually generating real shareholder value, and embracing this kind of capitalist approach to creating space, I think it ends up coming to the benefit of humanity in this world. And people don’t realize just how much.

This is more than a billionaires space race, right? That’s something I take issue with when I hear, “oh the billionaires is just want to go to space and have a ride”. That’s not the goal. And I think people underestimate just how many technological innovations come from space-based research. And it’s not just people riding up there to have fun. A lot of amazing things have come from space to date. And I think it’s only going to accelerate.

When you talk about satellite connectivity, that helps bring internet connectivity to two-thirds of the world that currently isn’t connected, which is bonkers to me, something we sort of take for granted as part of a developed, wealthy nation. And this, that’s just one example of I think how space technology is going to improve. We could spend multiple podcasts on this.

Dan Kline  10:47  And it’s not just like parts of the world you think of as underdeveloped. There’s no good internet setup where my family has a house in in Jaffrey New Hampshire. We have to use satellite internet, which is vastly inferior to Starlink. So if someone lived there, getting Starlink, which would be an option would make a ton of sense. And we talked about Steve, I spend a lot of time in the Bahamas, where there’s not good internet, the best internet in the Bahamas is 3g, so that means it’s not fun watching a Netflix (NASDAQ: NFLX) movie. That means a lot of companies can’t expand there. And I actually push back pretty aggressively.

When you look at the billionaire space race, Elon Musk has a profit motive and that’s fine. Profit is good. Jeff Bezos actually believes for humanity to survive, we need to go to Mars. And all of science fiction more or less says that’s true. And I realized science fiction isn’t fact. But if you look at like most growth trajectories in the US like it is grow or die. And at some point, we’re not going to be able to grow. And I know that’s that’s hard to think of when you live in Montana, when there’s a lot of space. Or even here in Florida, where basically aside from the Orlando area, the whole middle of the state between the coast is empty, eventually those places are going to fill up. Plus we’re going to sink so like where I live is not necessarily going to be viable 100 years from now.