Watch out for investors: space is difficult
Investors are understandably excited about the potential of the space, but two leading companies in December recalled that rocket companies rarely get it right the first time.
Appearing on Motley Fool Live in the December 14 edition of “The Wrap,” Lou Whiteman, Motley Fool contributor, and Jason Hall, host of “The Wrap,” take a look at two notable mishaps and explain why investors need to be prepared for other issues at hand. come.
Lou Whiteman: Actions of Galactic Virgo (NYSE: SPCE) ended up down 17% today, and it is not in itself news that Virgin Galactic has increased or decreased by 15%, 20%. What’s new is that there is actually a reason why today. Over the weekend, this space tourism company did a test flight and it didn’t go as planned. The on-board computer lost contact with the rocket motor, causing an automatic shutdown, and the Unity spacecraft glided toward Earth instead of soaring into space. It’s a failed test. It comes just days after Elon Musk’s private company SpaceX saw the demo launch of its interplanetary starship rocket end in a fireball.
Listen, let’s not damage either one. Neither of those things went as planned, but in the grand scheme of things, both companies have had a lot of wins from these failures. Virgin Galactic had a system failure but not a mechanical failure, and that ended up being a valid proof of concept that their security system was working, which is a huge deal if you’re going to send tourists into space. He slipped exactly as he was meant to be. For SpaceX, the machine had a vertical takeoff. He climbed eight miles. He came back to Earth. The problem again was that the tank pressure was too low, preventing the spacecraft from decelerating enough, causing it to crash at the entrance. But a lot has happened there, and that’s just what testing is all about. The important thing to remember, the lesson for investors here is, as Jason said, space is tough. Virgin Galactic is the publicly traded company here. They have generated no income, zero in each of their last two quarters, but it is valued at $ 6 billion over its potential. Nothing has changed this weekend in terms of potential, although the stock is down 17% today. Almost inevitably, since humans started trying to leave this planet, things haven’t gone as planned. There are a lot of tests, there are a lot of failures. It’s a public company, so there’s a lot of attention on it. It is cutting edge science. Investors need to understand this. Again, we talked about the speculative parts of a diversified portfolio. This is another stock that fits a lot in this area, but you have to understand that advanced science is trial and error, and the error when dealing with rockets can be dramatic. If you are not ready for this, please do not buy the stock, okay? [laughs]
Jason Hall: Yes. I don’t remember Thomas Edison saying anything about chess. He said he hadn’t failed. He just learned a thousand ways that didn’t work or something like that.
White: Relatively speaking, these two companies, these two failures, and wow the one from SpaceX if you haven’t seen the video watch it because it’s really cool. But the two of them, the key thing they were looking at wasn’t what had failed. It looks like split hair, it looks like public relations, but it is very important when trying to accomplish these things.
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