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Tulipmania in house

May 12, 2021, 7:06 a.m.

A commercial space transportation company is about to go public, valued at around $ 1 billion, even though it does not yet offer commercial space transportation. Momentus of Santa Clara, California, which sells in-space shuttle services that move satellites between orbits, has a moment in the sunshine. And the 3-year-old startup isn't even unusual: the room is filling up with all kinds of startups similar to the flowers that lit a speculative bubble centuries ago. In fact, we are approaching tulip mania in space.

Between Q1 2020 and Q1 this year, private equity investors pumped $ 8.7 billion into space companies. That's a 95 percent increase over the last 12 months – and it happened during a raging pandemic. "A nearly doubling in investment levels in the face of a global economic crisis is remarkable," venture capital firm Seraphim noted in a recent report. And investors didn't just do a few Momentus-like deals: they signed 68 deals worth an average of $ 46 million each.

The venture capital investments include $ 130 million for Axiom Space of Houston, which plans to build private space stations, and $ 170 million for ABL Space Systems, one of many startups building mini-missiles.

The UK government has now invested $ 500 million in London-based satellite internet provider OneWeb to save it from bankruptcy. Another mini rocket start-up, Isar Aerospace Technologies from Munich, has just sold launch services worth 11 million euros to the federal government – the first time Berlin has bought such services from a private company.

The space is full of start-up activities. Technology types in Silicon Valley and new space strongholds such as Munich are building rocket launchers, mini rocket launchers, satellites, satellite transport vehicles, sensors, communication systems, propulsion engines and spacecraft that serve satellites. Others offer manufacturing in space, plan to make anything from rockets to human tissue, and even try to build tools for space mining.

"In the past, space was reserved for governments and intergovernmental organizations as it took huge capital investments to bring assets into space," said Mark Dickinson, executive director of the Space Data Association, a leading association for the space industry. “These obstacles have been fundamentally removed in recent years. Now satellites can be much smaller making it cheaper to launch, and these satellites can be grouped onto a single rocket, further reducing costs. “You can start a lot of other things pretty cheaply as well. But it's only cheap compared to the cost of space over the past few decades. Building a spacecraft costs a lot more money than building an app.

There is another reason for the sudden gravitational pull of the atmosphere: stellar force. "Elon Musk with SpaceX and Jeff Bezos with Blue Origin have made private space companies much more public," said Dickinson. “Musk has a real following. … Everyone wants to be the next SpaceX. “Musk's 19-year-old company is not only launching the feat of partnering with leading government space agencies to build rockets and transport people into space – including four astronauts who returned from the International Space Station on May 2nd – but is also launching many satellites. In the past few years, the company has launched around 1,500 of its Starlink broadband mega-constellation satellites. SpaceX single-handedly doubled the active number of satellites in orbit.

It's exciting, but not a completely positive turn. Earlier this month, a 40,000-pound Chinese satellite crashed into the Indian Ocean – although there was a clear risk that the satellite could have hit an inhabited area. Today more defunct satellites orbit the earth than functioning satellites, and the more satellite companies launch into space, the more crowded it becomes. An estimated 100,000 satellites will orbit the earth by 2030, and there is no global regulator in place to ensure that defunct satellites are safely returned.

As big as it may be, the space is getting denser and denser. This increases the risk of collisions, including the space version of multicar clusters on highways that can inflict tremendous damage on satellites that each and every one of us rely on for navigation, communication, and a growing number of other aspects of daily life. And consider this: Such a collision could cause an environmental disaster that would fill the room with rubble and deny future generations access. We, Earthlings, are thus faced with a double risk: an overcrowded and therefore dysfunctional space and an overloaded cosmos whose garbage will fall on us in the Chinese satellite style.

There are room sensors, but they cannot keep up with the satellite boom. “The use of satellites is increasing rapidly. The question is how do you track them all, ”said Dickinson. “The rules in space go back many years, and the people who introduced them didn't see that traffic growth. The United States has a number of committees that set standards, but it's up to the national space agencies to enforce them. It really is a wild west. "

The Wild West in space is reflected in an investment in the Earth's Wild West. When Momentus first went public, it was driven not only by its own momentum but also by a new fashionable financial instrument called SPAC, or a special purpose vehicle also known as a blank check company. SPACs are shell companies that do not have an operating or business plan. They can be set up by investors to partner with another company and get it public quickly. These shell firms are booming.

In January alone, US-based SPACs raised $ 26 billion, more than a third of the amount SPACs raised in 2020, which was a staggering six times the amount SPACs raised in 2019 Little Known SPACs brought in almost as much as all IPOs of the year combined. The situation is reminiscent of the tulip mania in the Netherlands in the 17th century, when people invested vigorously in tulip bulbs fearful of missing out on the next big thing.

Combine a cosmic onslaught of lots of startups with expensive kits and unproven skills (not to mention commercial potential) on the one hand, and access to SPAC funding on the other, and you've got what it takes to be a space bubble. "Many companies floated by SPACs have little to show in terms of business plan or revenue, which in some cases leads to shareholder lawsuits from disgruntled investors," warned Ivana Naumovska, professor at INSEAD, in the Harvard Business Review in February The SPAC bubble is about to burst. "

This is a sign of the brand new space start-up market. Momentus went public for around $ 1 billion despite having to part ways with its CEO and key innovator, Mikhail Kokorich. The US Foreign Investment Committee, which is responsible for examining business deals for national security reasons, declared Momentus a foreign entity because Kokorich and his co-founder Lev Khasis are Russian citizens. Khasis is in fact the first deputy CEO of Sberbank.

To ensure that Momentus can be viewed as an American and thus continue its listing plans, Kokorich quickly moved away from Momentus' business and resigned in January. Meanwhile, Khasis placed his shares (officially owned by his wife) in a blind trust.

The world has seen bubbles. In 1637 the Dutch tulip bubble suddenly burst. In 2001, online grocer Webvan filed for bankruptcy just two years after a frenzied IPO and set the first dot-com bubble in motion. But when space startups go bust, it's not just a problem for their investors, it's a problem for all of us.

When space companies go bust, nobody is responsible for getting their equipment out of space. This means that all of these satellites that go into orbit can stay there for thousands of years and collide with the other pieces that we keep sending out into space – or falling back to Earth. As HAL 9000 says in Stanley Kubricks 2001: A Space Odyssey, "This mission is too important to me to allow you to compromise it."

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