Written by Arjun Vijay
On Tuesday, Virgin Galactic announced that it was going public, setting a new milestone for the space tourism company. California-based investment firm Social Capital Hedosophia (NYSE: IPOA) will inject $800 million into Galactic and the two companies would combine as part of the stock floatation agreement. The combined firm will be a space technology mammoth with a valuation of approximately $1.5 billion.
The merger is expected to give Virgin Galactic a good headway against its rival Blue Origin in its race to take filthy rich tourists into suborbital space. Both companies are hoping to begin their commercial expeditions within a year’s time. But before you decide to invest in Galactic, you need to have a good understanding of the competition and risks associated with space tourism.
Funding
Virgin Galactic was primarily funded by billionaire Richard Branson’s venture capital conglomerate Virgin Group. He has shelled out over $1 billion of his own fortunes to develop and test its rocket-powered space plane, named SpaceShipTwo. With the latest deal, Social Capital will take up a 49% stake in the Virgin Galactic, becoming a major investor.
Blue Origin, meanwhile, sits on the lavish funding from its founder Jeff Bezos, who also turns out to be the richest man on earth. Bezos has been privately funding the operations at Blue Origin by selling $1 billion worth of Amazon (NASDAQ: AMZN) stock every year. With generous cash flow from its founder, Blue Origin hardly sees the need for public capital.
Hence, if you are hoping to invest in space tourism, Virgin Galactic may be your sole option.
Trial runs
Galactic’s SpaceShipTwo has had two successful trial flights to 50 miles above the earth’s surface in December and February. If things go well, passengers will be taken in a similar trajectory to outer space, where they can briefly enjoy zero-gravity and photograph the planet that we live in.
Galactic faced a major setback in 2014 when a co-pilot was killed during a test flight, an incident that almost brought its operations to a halt. Currently, the company has two more space planes under development at its facility in Mojave.
Blue Origin has, meanwhile, completed at least 11 crewless trips of its New Shepard rocket, and it is next planning to hit the space with clients. Notably, both companies use reusable rockets.
First commercial trip
Galactic hopes to fly its first customers by the first half of next year, a trip that would include Branson himself. Galactic’s plane can carry eight people including two pilots and a trip would cost you somewhere between $200,000 and $250,000 per seat. The company claims that it has at least 600 reservations at the moment to take the minutes-long trip to outer space and back.
Most of Blue Origin’s activities have been under the wraps so we don’t have an estimate of how much it would charge its clients when it starts commercial operations, expected later this year or next year. The Bezos-headed company is looking to send people over 62 miles above the surface of the earth, which could probably be a bit higher than the Galactic expedition.
Also, Blue Origin’s rockets are fully automated, unlike Galactic, which does away the need for a pilot. Whether the lack of human personnel is an advantage or not is for you to decide.
READ: Electric airplanes: The market, the challenges and the key players
Other players
Elon Musk’s SpaceX and aircraft manufacturer Boeing (NYSE: BA) are also expected to join the race, as a direct competitor or an indirect one. Musk has ambitious plans to colonize Mars as well as to send tourists to the moon by 2023. The company has completed over 60 crewless orbital missions and could emerge as a major player.
One major question to ask is – are there going to be enough tourists willing to take up this expensive ride? Space travel comes with its own share of risks and rising competition is likely to intensify this further. In fact, that leads us to the biggest question – Are we ready yet?
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