Elon Musk is a predator — by which I mean to say, he eats competitor profit margins for breakfast.
Since setting up SpaceX in 2002 as a launcher of large rockets to compete with Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT), Musk has methodically moved to take over the entire space industry — or at least its most profitable parts — piece by piece.
In 2019, when he saw companies like Spaceflight Inc. making money bundling lots of small satellites into packages that could be launched cheaply on SpaceX Falcon 9 rockets, Musk announced the start of SpaceX “Transporter” missions to do the same thing. Within just a few months, Spaceflight was driven out of the business.
In 2020, Musk entered the satellite broadband internet market, announcing beta service for Starlink. Targeting the fat profit margins of earthbound cable companies like Comcast and Verizon, and aiming to improve upon both the long lag times of satellite communications companies like ViaSat and Hughes, he offered internet customers the ability to access broadband service for just $99 a month. (At last report, 4 million subscribers have taken him up on the offer.)
In 2021, SpaceX noticed that Virgin Galactic and Blue Origin were building space tourism businesses. Later that year, SpaceX sent four private astronauts into space on the Inspiration4 mission. The next year, SpaceX sent four more private astronauts to the International Space Station.
Lately, SpaceX has even been making moves on the nascent market for direct-to-consumer cellphone service. After noticing all the attention AST SpaceMobile (NASDAQ: ASTS) was getting after proving the concept, SpaceX began tweaking Starlink satellites to support cellphone-to-cellphone calls as well.
Result: At last report, SpaceX already has 26 times as many DTC satellites in orbit as does AST.
SpaceX as Europe’s biggest fear
All of which is to say, if you’re involved in space investing, you’d better keep an eye on SpaceX as a potential competitor, because sooner or later that’s what it’s going to become. Nor am I the only person to have noticed this.
In a recent interview with French periodical Les Echos, Stéphane Israël, the chief executive officer of Airbus subsidiary Arianespace, warned that SpaceX is now competing “against the entire space industry.” The interview focused on European Space Agency (ESA) plans to launch a “European Launcher Challenge” to design a new heavy lift rocket that could compete with Arianespace’s own Ariane 6.
Israël did not like this idea.
“I doubt Europe can afford two heavy rockets,” said Israël, highlighting the small size of Europe’s launch market, and its struggle to compete with SpaceX’s low prices. Rather, he urged ESA to fund Arianespace efforts to build reusable rockets to upgrade Ariane 6 down the road.
Arianespace’s parent company seconds the emotion. “Intra-European competition could end in blood and tears,” so the continent needs to unite instead to compete against SpaceX, says Antoine Bouvier, special advisor to Airbus CEO Guillaume Faury. “Competition [within Europe] will play into the hands of other global players.”
By which he means: SpaceX.
Israël’s worries extend beyond space launch, too. He says Europe needs to champion not just a single rocket-builder, but a united effort to build and operate satellites as well.
In this second category of space business, Israël cites the planned IRIS2 satellite constellation, which Europe calls its “Starlink-Alternative.” Bouvier likewise calls it “Europe’s response to SpaceX and Starlink” — albeit at a much higher price.
What it means to investors
None of the above is surprising. Arianespace launches rockets built by its parent company Arianegroup (Airbus, in turn, is one level up from Arianegroup in this corporate structure). Of course Arianespace (and Airbus) think it’s a bad idea to have another European company competing with them.
Similarly, IRIS2 is a project sponsored by Europe’s SpaceRISE consortium. As currently structured, SpaceRISE will consist of about a dozen different European space companies (Airbus among them) working to jointly build and operate IRIS2 satellites. Airbus may be only one part of this consortium, but it still makes sense that Airbus would prefer not to have anyone else compete with its team, so it can focus on competing with SpaceX instead. This might not be the way capitalism is supposed to work, but you can still see where they’re coming from.
Meanwhile, SpaceX, which just wrapped up a funding round valuing it at $210 billion in June, has just announced a new round of funding. Its proposed valuation today: $255 billion.
Now we just need to figure out how to invest in SpaceX.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Comcast, Lockheed Martin, and Verizon Communications. The Motley Fool has a disclosure policy.
Billionaire Elon Musk Takes on “the Entire Space Industry” was originally published by The Motley Fool
