Forget SpaceX: This Canadian Space Tech Company Is Going Public Soon!
Elon Musk’s SpaceX is probably the most exciting tech company in its industryright now. With several satellites in orbit and a track record of successfullaunches in recent years, SpaceX has established itself as a market leader.Unfortunately, the company is private, which means ordinary investors can’tbet on its future.However, a Canadian space tech firm is about to go public soon. This couldopen the floodgates for more space stocks in the future. Here’s why investorsseeking growth should monitor this sector closely.
Space tech’s potential
The global space industry is expected to generate revenue of US$1.1 trillion(CA$1.4 trillion) or more in 2040. That’s up from the current US$350 billion(CA$440 billion). In other words, this is a massive opportunity. It’s also amarket with stratospheric barriers to entry.Space tech is tightly regulated, and the biggest customer at the moment is theU.S. government. Not only is the underlying technology expensive andcomplicated, but there’s an added layer of government bureaucracy on top.National security concerns and defence contracts complicate things further.This means this trillion-dollar opportunity is likely to be dominated by justa handful of players. Elon Musk’s SpaceX seems to be the frontrunner. Thecompany is currently worth US$74 billion (CA$93 billion). Rivals Blue Originand Rocket Lab are not far behind.Canada has a space tech challenger too. In fact, it’s about to go public.
Brampton-based MDA (previously known as MacDonald, Dettwiler and Associates)is an iconic Canadian space technology firm. The company created the Canadarm,the robotic arm used on the International Space Station.MDA was acquired by a group of private investors for $1 billion last year,during the restructuring of parent company Maxar Technologies. Now that MDA isan independent firm, it’s looking to raise $500 million from the publicmarket.That money could help it expand its operations. MDA currently provides roboticsystems, satellite systems, and satellite imagery analysis. It helps companiesmonitor shipping containers and climate change from low-Earth orbit. MDA isalready a key supplier to NASA. As the industry expands, MDA could be acritical supplier to market leaders such as SpaceX and Blue Origin.Story continuesKeep an eye on this upcoming initial public offering.
The commercial space technology sector is extremely exciting. The market couldtriple in the next few decades, creating a trillion-dollar opportunity forearly entrants. Barriers to entry could restrict competition and enhance thevalue of market leaders.So far, Elon Musk’s SpaceX and Jeff Bezos’s Blue Origin seem to be gunning forthe top spot. Several other space tech and infrastructure companies haveemerged in recent years. However, Canada’s established space tech supplier isabout to go public soon. Keep an eye on MDA, as it raises funds and expandsoperations.For growth investors, this burgeoning industry could be ripe with generationalwealth-creation opportunities.The post Forget SpaceX: This Canadian Space Tech Company Is Going Public Soon!appeared first on The Motley Fool Canada.More readingFool contributor Vishesh Raisinghani has no position in any of the stocksmentioned. The Motley Fool recommends MAXAR TECHNOLOGIES LTD.The Motley Fool’s purpose is to help the world invest, better. Click here nowfor your free subscription to Take Stock, The Motley Fool Canada’s freeinvesting newsletter. Packed with stock ideas and investing advice, it isessential reading for anyone looking to build and grow their wealth in theyears ahead. Motley Fool Canada 20215 Public Space Companies to Invest in Over the Next DecadeAlways being on the lookout for emerging technologies with high growthpotential is the basis of successful investing, particularly if you’re open tomaking bold decisions. And when it comes to new tech, nothing’s quite asexciting as space exploration.Johannes Eisele | Getty ImagesSpace — the final frontier — offers more than a few opportunities for theexploring investor. Moon rockets and space stations don’t come cheap, andspace was once the exclusive domain of national governments. But public andprivate companies are now involved in satellites, research, mining,communications and space tourism. The space business has branched into severaldistinct sectors, with hundreds of companies involved, and has even developedits own market index and specialized research sources.Related: How This AI Company Is Working to Transform Space Exploration in anAge of Global ChangeAccording to the Space Foundation, the revenue of the global space industrytotaled almost $415 in 2018. More importantly, however, predictions by theBank of America Merrill Lynch put the worth of the industry at a massive $2.7trillion by 2045. So, if innovative technologies are your thing, now’s thetime to get in on the action and begin investing in space companies.We’ve all heard about SpaceX – the company behind the development of areusable rocket and launch system, founded by Elon Musk. SpaceX is a privatelyfunded company with no plans of going public, however, so at the time ofwriting it doesn’t present any investment opportunities.Related: NASA Astronauts Successfully Dock SpaceX Crew Dragon at ISSHowever, there are several public companies on the market working in differentareas of space exploration. Although they might not be receiving the samepublicity as SpaceX, they’re no less worthy of attention and investment.
1. Virgin Galactic (SPCE)
Virgin Galactic — part of Richard Branson’s Virgin Group empire — was thefirst publicly traded commercial space tourism company. The majority of thecompany’s efforts are focused on making passenger flights into space areality.Related: Virgin Galactic Signs NASA Deal to Take Private Citizens to the ISSIn addition to its ambition to conquer space, Virgin Galactic is alsodeveloping hypersonic travel technology, having entered into a Space ActAgreement with NASA. Hypersonic flights would revolutionize intercontinentaltravel, cutting down the transit time between London and New York to as littleas two hours, instead of the eight it takes with current flight technology. Atrip from London to Australia, meanwhile, would take just four and a halfhours — instead of almost 22.
2. Boeing (BA)
In addition to designing, manufacturing and selling airplanes, telecomsequipment, missiles and rotor craft, Boeing is also working on rockets.Boeing’s history with space travel reaches back further than most peoplerealize: in 1969, the company was involved in the creation of the Saturn Vrocket, which propelled Apollo 11 to the Moon. In the course of its work withNASA, the company has also built numerous satellites, as well as beingresponsible for managing the International Space Station.Currently, Boeing is developing spacecraft capable of carrying astronauts toand from the International Space Station. The company’s largest space projectis the Space Launch System rocket, intended to explore deep space.
3. Northrop Grumman (NOC)
Northrop Grumman is one of the world’s leading weapons manufacturers, with anannual revenue of over $30 billion. Although recently, the company’s beenknown mostly for its development of stealth bombers, it has been working inthe field of space tech development for over 60 years.At the moment, Northrop Grumman is working on building NASA’s James Webb SpaceTelescope. The company is also involved in the development of the ChandraSpace Telescope and the Dawn asteroid explorer, as well as taking part inprograms intended to develop technology for observing Earth from space.
4. Lockheed Martin (LMT)
The world’s largest defence contractor, Lockheed Martin is one of the majorplayers in the space industry, too. As a contractor to NASA, the company builtparts for the Apollo 11 spacecraft in the 1960s — as well as satellites andspace probes. Lockheed Martin’s other major space projects include the deep-space Orion spacecraft and the Mars InSight lander.In terms of stock prices, Lockheed Martin is the highest on this list, havingreached almost $440 in February this year. During the crisis-related crash inmid-March, the company’s stock dropped to just under $300, suffering much lessthan the vast majority of other stocks. It also recovered very well, reachingover $400 in the first week of June.
5. Procure Space ETF (UFO)
This exchange-traded fund focuses on investing in companies that are alreadyprofiting from the space industry, rather than looking to in-development techand far-off revenue streams like space tourism. Specifically, the ETF’s policyis that 80 percent of investments are into companies that receive at leasthalf of their profits from the space industry.An example of how profit can be made from space without involving space flightor related tech is how satellites are used for emerging technologies on Earth.5G, blockchain and crypto currencies, for instance, are all dependent onsatellites and other space-based systems.Key holdings of Procure Space include Boeing (described above), IridiumCommunications, Airbus and Maxar.Related: 25 Unforgettable Moments in Space Exploration to Celebrate the 50thAnniversary of Apollo 11Six Canadian tech companies eyeing IPOs amid investor craze for digital stocksFarmers Edge, a Winnipeg-based agricultural technology provider, is set tofile a prospectus for a public offering underwritten by National Bank.David Stobbe/The Globe and MailFrothy markets and a recent frenzy for software-focused businesses haveconvinced more Canadian technology companies to consider going public, settingthe stage for a potential surge of initial public offerings that could eclipselast fall’s rush. At least six firms have recently lined up investment bankersto explore IPOs, potentially by the spring, The Globe and Mail has learned.Farmers Edge Inc., a Winnipeg-based agricultural technology providercontrolled by Fairfax Financial Holdings Ltd., is set to file a prospectuswith regulators for a deal underwritten by National Bank Financial.Auvik Networks Inc., a Waterloo-based maker of software that manages andmonitors internet-network traffic, is also considering going public. It hastapped Canaccord Genuity and RBC Dominion Securities as investment bankingadvisers. Magnet Forensics Inc., also based in Waterloo, is a creator ofsoftware that fights cybercrime and has lined up BMO Nesbitt Burns andCanaccord Genuity for a potential IPO.Story continues below advertisementSaskatoon’s Vendasta Technologies Inc., which sells a suite of digital toolsincluding white-label e-commerce platforms to companies that serve smallbusinesses, has engaged CIBC World Markets, National Bank and TD Securities toexplore an IPO. And Thinkific Inc., whose software platform is used byentrepreneurs and businesses to create and sell online courses, has picked BMOand CIBC as its lead advisers should the Vancouver company proceed with theidea.Those five IPO candidates join Vancouver-based Cymax Group Inc., an onlinefurniture marketplace provider controlled by billionaire Markus Frind, whichhired Royal Bank and Toronto-Dominion Bank late last year to lead its IPO.Several other companies are believed to be in early-stage discussions withadvisers.The Globe is not disclosing its sources because they are not authorized tospeak publicly about these matters. The sources stressed that in most casesfinal decisions about whether to pursue public listings have not been made andwill depend on market conditions and how each successive deal is received byinvestors.Current IPO candidates are keen to cash in on the recent craze for new techissues in Canada and the United States. Montreal-based online payments companyNuvei Corp., for example, set out to raise US$600-million in September butbumped its final haul to US$805-million – a record for a Canadian tech IPO –after the deal was 20-times oversubscribed.Many newly issued stocks have soared once they began trading. Nuvei wentpublic on the TSX at US$26 per share and closed Thursday at US$55.91, whileshares of Dye & Durham Ltd., a consolidator of software providers for legaland business professionals, are up almost sixfold from their $7.50 issue priceon the TSX last July. Online-commerce software provider Shopify Inc., whichwent public in 2015, became Canada’s most valuable company by marketcapitalization last year.Investors have rushed into tech stocks since the depths of the pandemic lastspring, chasing companies they feel will benefit from greater adoption ofonline commerce, learning platforms and remote health care services, as wellas those that offer the efficiency benefits of increased digitization. Many ofthe companies are not profitable, though, and valuations have approached whatsome market watchers warn are dangerously high levels.Prior to 2020, just 12 IT company IPOs in the previous 11 years had raised$50-million or more. By early last year, Canadian tech companies wereincreasingly avoiding or delaying going public because they had ready accessto private capital at attractive valuations. Now, public markets are just ascompetitive, if not even more lucrative.Story continues below advertisementTelemedicine startup MindBeacon Holdings Inc. scrapped plans to raise$30-million from private investors last year after investment bankers told CEOSam Duboc he could do better on the public markets. The company raised$65-million in an IPO on the TSX last month, even though MindBeacon generatedrevenues of just $6.6-million in the first nine months of 2020.Because of this heavy investor interest, IT stocks now account for 10.3 percent of the value of the S&P/TSX Composite index, quadrupling their positionover the past decade.Auvik made a name for itself selling network management and monitoringsoftware to companies that oversee those networks for small- and medium-sizedbusinesses. It expanded its capabilities during the pandemic as companies wentremote, helping to reduce bottlenecks and disruptions from the increased useof virtual private networks.Thinkific has also seen a jump in usage during the pandemic. The nine-year-oldcompany announced four months ago that it had raised $22-million in venturecapital to fund a hiring spree after experiencing a 144-per-cent jump inrevenue, to an annualized rate of $33-million. Last month, Thinkific said ithad seen 63 million new course enrolments in 2020.Magnet has benefited from a different digital trend – the global growth ofcybercrime. Founded by former Waterloo police officer Jad Saliba and formerBlackBerry Ltd. executive Adam Belsher a decade ago, the company is builtaround software Mr. Saliba developed to help police with criminalinvestigations. Originally shared for free with police forces, the softwareautomated the process for investigators to access incriminating data ondevices and networks that was thought to be hidden, lost or deleted. It hasaided with investigations into terrorism and child pornography.The 275-person company has increasingly sold its products to corporations tohelp them guard against the theft of their digital assets. It has about 4,000customers, split between law-enforcement agencies and companies.Story continues below advertisementVendasta, which secured the largest venture-capital investment ever by aSaskatchewan tech company in 2019, has experienced steady growth since ashort-term lull early in the pandemic. The company, which has about 500employees and generates about $50-million in annualized revenue, offers toolsto help small businesses speed up digitization efforts in such areas ase-commerce, remote collaboration and online learning.Farmers Edge, meanwhile, was an early Canadian agricultural-technology leader,using data science and AI-powered software to help farmers improve yields. Itraised private capital in the mid-2010s from Silicon Valley-based KleinerPerkins Caulfied & Byers and Toronto-based Osmington Inc., which is controlledby David Thomson. (Woodbridge Co. Ltd., the Thomson family holding company,owns The Globe and Mail.)Fairfax bought Kleiner Perkins’s stake in 2016 and has since gained majoritycontrol of the company. Fairfax recently reported a loss of $21.8-million inthe nine months ended Sept. 30 for its stake in Farmers Edge.Despite heavy demand from public investors, some Canadian tech companies stillprefer to stay private. Kurtis McBride said his Waterloo-based traffic-signal-management technology provider, Miovision Technologies Inc., is not looking togo public until its operating metrics become more predictable. However, he’sbeen overwhelmed by interest “from bankers telling you the public markets havegone bananas.”Spokespeople for Vendasta, Thinkific and Magnet declined to comment onpotential IPO plans. Auvik and Farmers Edge did not respond to requests forcomment.