Morgan Stanley Research
4 February 2021
Select excerpt from July 2021: SHIELDWatch Newsletter
As space becomes more accessible through lower costs, cloud based computing, and new manufacturing techniques, more and more companies are debuting in a sector that was previously only attainable for government organizations. Increasingly, private business has taken to the stars, offering new possibilities, and alleviating some of the workload from traditional government space agencies like NASA. Overall, space is more and more a business venture – from tracking orbital debris to providing broadband internet globally, the public sector is seeing the value provided by private business. In addition, Special Purpose Acquisition Companies (SPACs) will likely become more common as they are a particularly well-suited business model in space.
The rush to explore the expanding frontiers of the space economy is accelerating, with sustainability- and government-related applications driving critical growth and private investment.
“If I had to pick just three words to capture my conversations in this arena, it would be ‘space is existential,’ from the future of the planet to the future of commerce,” says Adam Jonas, Head of the Morgan Stanley Research Space Team.
- A growing relationship between space and climate change
Space and sustainability have aligned. With more investors focused on environment, social and governance (ESG) factors, satellite imagery may provide them with key data on the environmental impact of company activities. Satellite applications include monitoring greenhouse-gas emissions from companies and regions, helping utilities optimize renewable energy infrastructure and mining data to project how climate change could affect particular industries. - Increased capital formation
First, investors are rethinking “old” vs. “new” space. It’s now less about the disruption and replacement of traditional players, and more about how the capabilities of new entrants complement them. “There’s enough room for the exquisite legacy capabilities of aerospace outfits and the more affordable new commercial players,” says Jonas.
Second, SPACs — special purpose acquisition companies — may be a potentially well-suited mechanism to attract capital for long-horizon business models in space.
Finally, the space industry now regards private corporate involvement in the sector more positively. As government entities like NASA set their sights on ambitious missions, such as Mars exploration, private companies are focusing on low-Earth-orbit transportation, satellite launches and commercial human spaceflight. Government agencies are also welcoming greater involvement from the investment community to develop the commercial potential of space and space-related markets. - Mitigating orbital debris
According to the U.S. National Oceanic and Atmospheric Administration, the number of active satellites in orbit could increase by 50% or more in 2021. As space becomes more congested, the threat of “space junk”—orbital debris from old spacecraft and satellites—to new satellites and rocket launches has grown. Some government agencies now struggle to track this orbital debris, creating potential demand for private companies to monitor and manage this potentially catastrophic space waste. - Space and security
Space has become an increasingly contested domain among countries, underscoring the need for "space domain awareness" by private and governmental players. That means identifying, characterizing and understanding objects in orbit.
In the U.S., space could therefore become less of a partisan issue. Satellite providers, for example, see their services cutting across political lines to address issues important to everyone, including national security and bridging the digital divide. - Telecoms a near-term focus
Satellite operators see value across all three orbital altitudes—GEO, MEO and LEO (Geostationary Equatorial Orbit, Medium Earth Orbit and Low Earth Orbit, respectively)—with companies taking different approaches to blending them.
GEO still underpins the industry, but telecoms also want to provide differentiated broadband services with integrated, seamless offerings for consumer, business and government customers.
Telecoms will also need to work with regulators at the U.S. Federal Communications Commission and the UN’s International Telecommunication Union to treat space as a shared global resource, with spectrum rights and orbital debris being two key issues.
Want to read more? Check out the July 2021: SHIELDWatch Newsletter
