Orbital Sciences’ (ORB) televised launch of a resupply mission to the International Space Station was a reminder that investing commercial space transport is no longer the “final frontier.” But even with the recent surge in launches, commercial space is still a nascent market — and investors who want to “go where no one has gone before” might want to pack a parachute.
Defense/aerospace giants are staking a claim in commercial space, particularly as defense revenues decline. United Launch Alliance, a Lockheed Martin (LMT) and Boeing (BA) joint venture, launched a Delta II rocket carrying the Orbiting Carbon Observatory-2 (OCO-2) payload for NASA last week. ORB recently announced plans to merge with Alliant Techsystems (ATK) to boost its commercial space play.
One of the most interesting approaches to commercial space is Elon Musk’s Space Exploration Technologies (SpaceX), which develops and manufactures Falcon launch vehicles and the Dragon spacecraft. Musk’s dream of transporting humans to Mars within the next two decades might seem pretty far out there, but his company has proved its sound footing in early business successes. While SpaceX is private for now, an IPO could eventually be in its future, as InvestorPlace’s Tom Taulli writes. So how should investors play commercial space? That depends on your risk tolerance and investment horizon.
The truth is, commercial space is an exciting market that is probably not ready for prime time. Myriad issues ranging from safety and insurance to oversight and regulation must be ironed out before the really big money gets made. But this isn’t the first time that wildly new industries represent more risk than reward. Companies that move into a hot but embryonic market often wilt under the competitive heat — particularly true when large cap companies put a lot more resources into game-changing technologies
Here are three examples of first-to-market companies that seemed to be on the cutting edge of innovation, but wound up bleeding instead: