SPCE Stock on the NYSE
Some investors are betting big on the final frontier being a draw for wealthy adventurers looking to get a taste of the cosmos. At least, that’s the idea behind Virgin Galactic as it goes public today on the New York Stock Exchange under the name Social Capital Hedosophia (NYSE:SPCE).
Social Capital Hedosophia stock is the first space tourism stock to be available to retail investors, and it represents the creation of a whole new—potentially very lucrative—industry as companies look to monetize space travel.
On October 23, Virgin Galactic merged with Social Capital Hedosophia, which is one of the ventures of Chamath Palihapitiya, a venture capitalist and former early executive at Facebook, Inc. (NASDAQ:FB). (Source: “Virgin Galactic is set to trade on the NYSE on Monday as the first space tourism stock,” CNBC, October 24, 2019.)
This deal has permitted the space tourism company to list directly on the New York Stock Exchange today (October 28).
The merger, which was announced in July, saw Social Capital Hedosophia taking a 49% stake in Virgin Galactic. The deal gave the combined company a valuation of $1.5 billion, with Virgin Galactic’s founder Richard Branson retaining a 51% controlling stake.
As mentioned earlier, Social Capital Hedosophia/Virgin Galactic is the first space tourism stock, which is to say it’s the first publicly traded company looking to turn a profit from letting any person with the money and inclination to visit outer space.
Space has, after all, captured humanity’s imagination since we first looked up at the stars. In recent decades, space only further excited both young and old, with events like Sputnik and the moon landing being considered among humankind’s greatest achievements.
With that, astronauts have been among an elite cadre of professions with near-universal admiration.
And, of course, with that interest and admiration came people’s desire to see outer space for themselves. Now that desire could become reality for people anywhere, provided they can foot the exorbitant bill.
Social Capital Hedosophia/Virgin Galactic is hoping that this is not just a niche business, betting that more and more people are going to want to experience outer space in the near future.
At the moment, Virgin Galactic’s spacecraft can carry six passengers and two pilots to the edge of space, meaning that journeys will be exclusive and very expensive.
One of the big appeals for the journey is that it allows passengers to experience weightlessness for several minutes as the ship grazes the threshold of space before gliding back down to Earth.
A ticket will run passengers about $250,000 per person, and the company has a wait list of 603 people.
SPCE stock is a risky purchase, as the company is flying blind here. While having a wait list 600 deep is impressive, we have no idea how many people in the future will want to take a ride on the spacecraft.
Furthermore, while I imagine this is a relatively safe excursion, a single mishap could have devastating consequences for Social Capital Hedosophia and future space tourism stocks.
The fact is, the market research on space tourism is lacking and it’s therefore difficult to make accurate projections.
Space Tourism Stock Prediction
Social Capital Hedosophia stock could remain strong so long as there’s a list of wealthy fliers waiting in line to see the final frontier. But there’s only so many people with both the money to spend on space travel and the desire to do so.
The list of potential customers is relatively small, and while it has the potential to grow, the well could eventually run dry.
One way to counteract the potential decline in customer demand is to drive down costs. If Social Capital Hedosophia can continue to lower the cost of space travel as time goes on, then we could see SPCE stock grow for years.
If, say, space travel eventually becomes affordable for middle-class travelers, then we could see space tourism transform from a niche industry into a far more popular one that could net big gains for investors.
Another interesting play for Social Capital Hedosophia stock—and space tourism stocks more broadly—would be to get into the space freight game. Which is to say, licensing out technologies or ships to deliver goods into space. Elon Musk is already famously attempting to build such a business with SpaceX.
Social Capital Hedosophia is already interested in launching science missions, but the company could branch out in the future and challenge SpaceX and other companies for dominance in the government-contract field.
All in all, there’s potential within SPCE stock and space tourism stocks in general.
While I ultimately believe that the real money is in companies that are looking to lock in major deals with governments for space developments, Social Capital Hedosophia stock could see gains if the company is able to keep its customer base growing steadily, which is dependent on its ability to keep costs down.
Social Capital Hedosophia/Virgin Galactic will likely benefit greatly from being the first space tourism stock.
Many investors could look at the company and believe that SPCE stock would be a great early opportunity, before what is potentially a multi-billion-dollar industry matures.
As such, Social Capital Hedosophia stock has potential, no doubt, but it also has a lot of risk.
We’ll be watching this stock closely in the coming days and months to see if this is the beginning of a brand new gold rush for investors, or if it’s a matter of selling high on dreams.
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