The FTSE 100 doesn’t provide much exposure to the exciting, often-California-based, companies that are changing the world in which we live.
One of those exciting companies is SpaceX (Space Exploration Technologies Corp). Its 42% owned by Elon Musk — who also controls 79% of voting rights — and isn’t listed on any public exchanges.
The aerospace manufacturer and space transportation company was founded by Musk in 2002. It’s known for its ambitious goals of reducing space transportation costs and enabling the colonisation of Mars.
The company is also known for its reusable spacecraft, and the deployment of the Starlink satellite internet constellation.
So, should I want exposure to SpaceX? Is it worth it?
Space is big business
The global space economy grew 8% in 2022, reaching a market value of $546bn. And it’s anticipated to increase by 41% over the next five years.
Despite some uncertainties in the global economy, the space sector is projected to remain robust and resilient throughout the medium term.
While the US is certainly leading the way, China, India, Russia and the UK all have growing space industries. In 2021, the UK’s related industry was worth £17.5bn.
Over the next 10 years, there are some 400 missions planned to the moon alone, with a cumulative value of $137bn.
So it’s big business, and as with his electric vehicles (EVs) venture, Musk is once again at the forefront of this fledgling industry.
Valuation
SpaceX is valued at nearly $150bn by its owners, according to sources, close to a capital raise earlier this year.
That already makes it one of the largest companies in the world. In fact, if it were listed on the FTSE 100, it would be the third most valuable company. Of course, there’s no guarantee a public market would agree with Musk’s valuation.
On 6 November, Bloomberg reported that SpaceX is expected to generate $9bn in revenue for the current year, stemming from its rocket launches and Starlink ventures.
Projections indicate that sales are set to increase to around $15bn in 2024, building on the strength of its Starlink operations.
This represents an impressive improvement from 2022, when the business registered $4.6bn in revenue.
So on a price-to-sales basis, SpaceX is trading at 16.6 times 2023 revenues and 10 times 2024 revenues. A P/S ratio above 10 normally suggests a company is expensive, however it’s not unusual to see high growth companies trading above 10 times. In fact, SpaceX is cheaper than Nvidia.
Of course, there’s plenty of risks relating to investing in this sector. It’s resilient, but technology changes rapidly and companies can get left behind. It’s not yet profit-making — it only recently hit cash flow breakeven.
Scottish Mortgage and SpaceX
SpaceX is Scottish Mortgage Investment Trust‘s seventh-biggest holding, representing 3.9% of the portfolio. It’s not a huge proportion, but it’s the best exposure I can gain through FTSE 100 stocks.
Scottish Mortgage’s various share holdings in equates to £498m worth of stock. That’s around 0.3% of the firm.
I already own shares in Scottish Mortgage, and the fact it has exposure to SpaceX makes the stock even more appealing to me. Musk’s company’s in prime position to dominate. I’m definitely considering topping up while the Scottish Mortgage share price is down.
