Gapping down
In reaction to earnings/guidance:
- KMX -12.5%, MU -4.1% (also to reduce headcount by 10% in CY23),
Other news:
- BLI -14.2% (to acquire IsoPlexis), LXRX -10.5% (topline results from Phase 2 study of LX9211), MTZ -1.2% (CFO to retire, names new CFO), MDGL -1% (announces $300+ mln in financing events)
Gapping up
In reaction to earnings/guidance:
- PK +2.8% (provides update on recent operating trends and capital allocation activity; sees Q4 FFO of $0.35-0.43 vs. $0.38 Capital IQ consensus ) BHR +2.4%, MLKN +2.2%, PAYX +1.1%
Other news:
- ORIC +57.3% (announces clinical development collaboration with Pfizer (PFE) for ORIC-533 in multiple myeloma and concurrent $25 mln equity investment by Pfizer (PFE))
- ALVO +13.7% (provides update on U.S. regulatory status of AVT02, Alvotech's proposed high-concentration, interchangeable biosimilar to humira)
- MRTX +6.9% (Adagrasib (KRAZATI) receives breakthrough therapy designation from FDA)
- FUTU +3.4% (proposed dual primary listing on The Stock Exchange of Hong Kong Limited)
- TSP +2.1% (announces restructuring; to trim 25% of workforce, will focus on autonomous trucking tech)
- GNL +1.4% (provides outlook on acquisitions)
- RAMP +1.2% (increases share repurchase program by $100 mln)
Analyst comments:
- DLO +1.7% (resumed with a Buy at BofA), GETY +1.6% (initiated with an Outperform at Wedbush), HELE +1.1% (upgraded to Buy from Neutral at DA Davidson)
Iran’s Online Crackdown Prompts Smuggling of Starlink Kits
Activists organize underground shipments of satellite internet terminals
Iranian border guards discovered the gray box in a van crossing from Iraq in late October. Inside was a sleek machine resembling a monitor. But after questioning the driver, the guards waved the vehicle through, people involved said.
The guards had just allowed a Starlink satellite dish sold by a division of Elon Musk’s company, SpaceX, into the country. Around 200 of the devices, which enable users to access the internet through satellite links, have been smuggled into Iran by supporters of a monthslong rights movement to help protesters circumvent a government crackdown on online communications, according to the people involved in some of the shipments.
Iran’s government has throttled down bandwidths, stepped up filtering of social-media sites and taken down virtual private networks, according to analysts and reports by nongovernment organizations. It has also sought to intercept Starlink and other satellite internet devices, which are illegal in Iran, according to the people involved.
The number of Iranians with access to Starlink is a tiny fraction of the millions who use virtual private networks and other platforms to evade government restrictions, users say. But the terminals provide internet access free from the government’s controls, making them especially useful for protesters seeking to send video files and communicate securely. Social-media apps have been widely used to organize and share footage of the protests.
One of the main efforts to get Starlink gear into Iran is by a group of Iranian-American activists and tech entrepreneurs in California, who began making plans to buy and ship the devices only days after the protests broke out, members of the team said.
To elude the government, some kits were repacked in boxes for microwave ovens or other household items. Each was carried separately––on boats crossing the Persian Gulf to Iranian ports, in vehicles crossing at border checkpoints, or even hand-carried over Iran’s mountainous border with Iraq, members of the team said.
Smugglers charged as much or more than the roughly $600 price of the kits to transport such risky cargo, group members said. So far, only one shipment has been turned away at the Iranian border, the people said.
A spokesman for Iran’s government didn’t respond to questions about the smuggling of Starlink terminals.
Senior Iranian officials have defended their crackdown, claiming that the protests have been instigated by the U.S. and other adversaries, partly by flooding the country with social-media apps that are responsible for influencing young Iranians.
Yet deciding how far to go in clamping down on online access is proving difficult for Tehran. If it shuts down the internet completely it could deepen Iran’s already severe economic woes, worsening the protests. If it eases up on the clampdown, the unrest touched off by the death in police custody of 22-year-old Mahsa Amini in mid-September could also spread.
“We shut down one VPN today and immediately it is replaced by another one supplied by foreign countries,” Mohammad-Jafar Montazeri, Iran’s attorney general, said in remarks on Dec. 3, according to Iran’s state media. “The only solution is shutting down the internet completely,” which he said most Iranian officials didn’t favor.
The regime is making daily adjustments to the clampdown. “This shift towards targeted censorship suggests that authorities may be attempting to minimize the cost of internet outages while maximizing the political impact by maintaining the pattern of blockages for long periods,” the Open Observatory of Network Interference, a nonprofit organization partly funded by the U.S. State Department, said in a report last month.
In the month after the protests began, Iran shut down access to its three major mobile networks in the evenings, when the protests were occurring, but eased the restrictions at other times, the report found.
After the protests broke out, the Biden administration eased Treasury Department restrictions on exporting internet services and equipment to heavily sanctioned Iran, enabling Starlink devices, virtual private networks and other network technology to flow legally to the country.
Mr. Musk’s rocket company SpaceX, formally known as Space Exploration Technologies Corp., has built a fleet of satellites in orbits relatively close to Earth, offering high-speed internet connections to users of its portable Starlink terminals.
Though designed for consumers, the system is being used heavily by the government and troops in Ukraine, where fighting with Russia has disrupted normal internet service. Mr. Musk has said around 25,000 Starlink terminals are in the country.
Critics of the U.S. government’s approach contend that Washington could be providing more help to private efforts to overcome Iran’s crackdown. “So far, the U.S. government’s posture has been reactive when it comes to Iranian internet outages,” said Jason Brodsky, policy director of United Against Nuclear Iran, a nonprofit group based in Washington, calling the easing of exports controls “necessary but not sufficient.”
A senior U.S. official said the Biden administration had taken multiple successful steps to aid protesters in maintaining internet access but didn’t want to be seen as meddling in Iran’s internal affairs.
Starlink connections were unavailable in Iran until Mr. Musk announced on Twitter that he was activating it on Sept. 23, minutes after the Biden administration said it was easing exports controls on providing internet gear and network services to Iran to aid the protests.
More than one million subscribers now use the system across the world, according to a Dec. 19 tweet from the company, which didn’t respond to a request for comment on its operations in Iran.
Unlike a fiber-optic connection, the Starlink dish communicates with a constellation of laser-linked satellites that beam internet data to and from ground stations. A router connects to the dish, allowing users to access the internet through Wi-Fi signals.
The California group’s plan required raising money from private donors and foundations to buy the Starlink RV model as well as to pay the $110 monthly fee per device for internet service so they would work in Iran.
Around 40 devices sent by the group have already arrived and another 40 are still in transit or being readied for shipment. With similar efforts under way from other activists, around 200 Starlink kits are believed to be in Iran, according to one member of the group.
The first of their Starlinks to make it to Iran was carried in the van stopped by the border guards, two members said. It was turned over to a protester in Tehran, who took it to the roof of his family’s apartment and attached it to a makeshift stand.
After five minutes, the dish connected to a satellite, the protester said in an interview. With his smartphone, he took a brief video, reviewed by The Wall Street Journal, showing the system was working and sent it to other members of the group in California. He covered the dish with one of his mother’s chadors, a black cloak worn by Iranian women, he said.
Another recipient was an amateur photographer in Iran’s Kurdish region, who has been sending video and photos of the protests using one of the smuggled devices, according to Hossein Fatemi, the Iranian owner of a New York photography agency, who has received many of the photos and sold them to clients.
“We are sure that the government knows that there are Starlinks in Iran, but it doesn’t know who has them or in what cities,” Mr. Fatemi said.
US banks: mind the $690bn bond valuation gap
There is a world of difference between what Wall Street and the markets believe debt is worth
Big US banks bulked up on bond holdings during the pandemic. Customer deposits were abundant. Ways to deploy them were not. America’s consumer and commercial banks poured their excess cash into debt securities. These included Treasuries and mortgage-backed securities.
Investors must now consider the threat posed to bank stocks by huge notional losses on these holdings.
The bond investments helped soften the blow that low rates and tepid loan growth had on net interest margins. But as the Federal Reserve aggressively reversed course this year, their value plunged.
The numbers are staggering. As of November 30, US lenders held $5.5tn of securities on their balance sheets, according to Federal Reserve data. That is 44 per cent more than before the pandemic.
There is a big gap between how banks value their holdings and what these are worth on the market. The Federal Deposit Insurance Corp reckons US banks are sitting on nearly $690bn of unrealised losses on their securities portfolios at the end of the third quarter, up from $470bn in the second quarter.
That represents a Grand Canyon-sized chasm on balance sheets. Fortunately, valuation rules allow banks to soften the blow to capital adequacy.
Banks can classify their security holdings as “held-to-maturity” (HTM) or “available-for-sale” (AFS). Those that are labelled HTM cannot be sold. But that means any changes in market value will not count in the formulas regulators use for calculating capital requirements. By contrast, any losses in the AFS basket have to be marked to market and deducted from the bank’s capital base.
To keep capital ratio stable, many banks have shifted assets away from AFS toward HTM. More than half of the $690bn in unrealised losses are from the HTM basket.
For now, US banks remains awash in liquidity and are suffering no obvious financial stress. But rising deposit outflows and the increase in unrealised losses could become problematic if they need to sell investments to meet unexpected liquidity needs.
Bond holdings could emerge as a serious pressure point for banks in volatile markets. Investors should watch out for this in 2023.
Early premarket gappers
- Gapping up: ORIC +56.3%, ALVO +9.6%, MLKN +5.1%, MRTX +4.1%, FUTU +3.5%, BHR +2.4%, PK +2.3%, TSP +2.1%, RAMP +2.1%, GNL +1.4%
- Gapping down: BLI -11.7%, LXRX -8.4%, MU -2.4%, MTZ -1.2%, UAA -1.1%, MDGL -1%
Japan approves nuclear energy U-turn to avert crisis
Decision comes amid electricity shortage and as country faces increasing difficulty in meeting net zero carbon pledges
Japan has approved a plan to revive the use of nuclear energy, redrafting an energy policy that has been paralysed since the 2011 Fukushima crisis to address a serious electricity shortage.
The U-turn in nuclear policy, first signalled by Prime Minister Fumio Kishida in August, follows softening public opposition to restarting reactors after repeated blackout scares in Tokyo this year along with rising electricity bills.
Under a new policy outlined by an advisory panel for the government on Thursday, the country would “maximise the use of existing nuclear reactors” by accelerating restarts in a reversal of a post-Fukushima plan to phase out the use of nuclear power plants.
It would also extend the lifespan of nuclear reactors beyond 60 years and develop advanced reactors to replace those that are decommissioned.
Japan sourced about a third of its energy from 54 nuclear reactors before the Fukushima disaster. Now, only nine are operational, forcing the country to burn additional coal, natural gas and fuel oil despite pledges to achieve net zero carbon emissions by 2050.
“There is a risk of an energy crisis for the first time since the 1973 oil crisis in the face of a severely tense situation,” said the 10-year road map released by the panel, citing the global rise in energy prices following Russia’s invasion of Ukraine.
“We recognised once again the fragility of our country’s energy supplies, which poses a challenge to our energy security,” it added.
Japan’s effort to accelerate nuclear restarts is also driven by the need to reduce carbon emissions as it struggles to meaningfully increase the use of renewable energy.
The road map states that renewable energy and nuclear power “will contribute to security” and help the country achieve both the goal of net zero emissions and a stable supply of electricity.
The government plans to invest more than ¥150tn ($1.1tn) together with the private sector in the coming decade to achieve its target. Of that amount, it will raise ¥20tn by issuing a new type of bond to attract private investment. Carbon pricing, which requires a monetary contribution for greenhouse emissions, will be used to finance the redemption of such bonds.
But experts say a series of hurdles remain in reviving nuclear power. Utility companies have few incentives to build next-generation nuclear reactors, which will cost about ¥1tn each.
“Extending the operation of the existing reactors could in turn hold back the construction of advanced reactors,” said Takeo Kikkawa, a professor at the International University of Japan and a member of the government’s energy council.
“To achieve carbon neutrality for 2050, now is the last chance to get the stalled nuclear policy finally moving,” he added.
Grid Bottlenecks Could Derail Europe’s Renewable Energy Boom
- Europe’s renewable energy industry is booming.
- If Europe is to remain a leader in renewable energy, the region will have to invest more into its grid.
- Grid bottlenecks could derail Europe’s green energy boom.
Europe’s energy transition ambitions face several challenges, but a major impediment to bringing new renewable power online is insufficient grid capacity. Rystad Energy’s current base case forecast has Europe adding as much as 530 gigawatts (GW) of solar PV and onshore and offshore wind between 2022 and 2030, more than 66 GW per year on average. Furthermore, the share of solar and wind combined as a share of total installed capacity surpassed 10% in 2010 and more than tripled in 2021, reaching 34%, according to Rystad Energy research.
Growth is not expected to slow down anytime soon, as European countries are planning huge additions of renewables over the next few years. If Europe is to remain a leader in the energy transition, a huge amount of grid capacity will need to be developed, both to integrate new generation capacity into respective countries’ power mixes and to better connect European countries so that electricity can flow in the most optimal way.
The staggering amount of new solar and wind capacity expected to come online in Europe in the coming years means that grid interconnectivity will be the bottleneck to both the more efficient use of energy sources as well as overall slower decarbonization of the power sector as more fossil fuels need to be used to compensate. Historically, this has been much less of an issue as Europe’s power system has been dominated by four large sources – coal, gas, nuclear and hydropower – all with varying degrees of dispatchability but none considered intermittent.
With the pace of renewable energy development substantially exceeding the speed of grid upgrades and expansion projects in parts of Europe, policymakers and the power sector will need to carefully examine if a country’s development plans for new generation capacity match its development plans for both internal and cross-border transmission capacity. The timelines for new projects are very long and some countries in Europe are already curtailing renewable power that could be used elsewhere – for instance, Germany curtailed about 10.2 terawatt-hours (TWh) of wind power in 2017, the highest of any European country to date. The yearly average is around 5% of variable renewable energy curtailed, highlighting how bottlenecks are already an issue.
“Europe’s increasingly connected power grid is one of the first globally to take on substantial amounts of renewable and intermittent power. Moving power around the continent to minimize the use of carbon-emitting fuels will only be possible if the grid is upgraded. This will not be simple, quick, or cheap, but it will reduce greenhouse gas emissions and increase energy security. The race is now on to see if grid upgrades can match the staggering levels of new renewables set to come online in the next decade,” says Fabian Rønningen, senior analyst, power markets at Rystad Energy.
The below chart shows how the existing capacity base and future capacity will be spread unequally between European countries, with the likes of the North Sea emerging as another European energy hub with hundreds of GW of capacity planned to come online in the coming decades. For a future energy system, in which Europe’s energy sources are utilized optimally, both policymakers and industry will have to think differently about grid development, compared to the status quo. Most of the new capacity that will come online in Europe in the coming decades will be solar and wind, with such resources varying significantly across the continent. Southern parts of Europe have better solar conditions than the north, while wind resources are highest in the northern and eastern regions of the continent, as well as all coastal and offshore areas. This means that Europe’s future energy system could have a much higher degree of electricity flows between countries than we see today, despite Europe already being considered well interconnected.
Case study: Spain
Spain has emerged as one of the European leaders when it comes to both solar and wind development, and currently has one of the largest renewables pipelines in Europe. Spain has the most economic solar potential of the large European countries due to its sizeable landmass and high yearly solar irradiation, while it has also been a pioneer in the European wind industry. Furthermore, due to its relatively weak coupling to the rest of continental Europe, Spain provides an excellent example of how internal European grid bottlenecks could hamper Europe’s energy transition.
Although grid development within Spain is expected to grow rapidly over the coming decade, only three high-voltage interconnectors to France are currently planned, two of which are not expected to come online before 2027. This is just one example of potential bottlenecks Europe could face over the next decade, as hundreds of GW of solar and wind power come online, while the development of supporting grid infrastructure lags, especially cross-border interconnections. Policymakers need to ascertain whether grid development plans are in line with ambitious renewable energy targets to ensure transmission capacity does not constrain the energy transition.
Installed capacity from renewable energy sources in Spain will more than double by 2030 in Rystad Energy’s current base case forecast. While installed capacity from non-renewable energy sources will drop from 54 GW in 2022 to 34 GW by 2030, capacity from renewable energy sources will grow from 64 GW to 151 GW. Solar will drive most of the growth in renewables, primarily driven by developments in central Spain. Expansion plans for transformer capacity are set to keep up with these ambitious growth targets in installed capacity. Spain’s transmission system operator (TSO), Red Electrica, has mapped out detailed plans for upgrades and expansions to its transmission network. Towards the end of this decade, these plans could see transformer capacity grow by more than 220% compared to 2022 levels. Although these upgrades to the network are planned across Spain, most capacity looks set to be added in southern and central Spain, particularly in communities such as Andalucia and Castilla y Leon (Figure 4). These are also the regions where most of the planned solar and wind capacity will come online in the next few years.
The last time a high-voltage interconnector between Spain and France went operational was in 2015. In subsequent years, the countries acknowledged the mutual benefits of further integrating their power grids by projecting three other high-voltage direct current connectors across their shared border. One of the projects is a 400-kilometer link that will run between the Cubnezais substation (near Bordeaux, France) and the Gatika substation (near Bilbao, Spain), known as the Bay of Biscay project. The interconnector will mainly be laid subsea in the Atlantic Ocean with the rest buried underground, and will be the first submarine interconnector between Spain and France. The project has total transmission capacity of 2 GW and will lift total interconnection capacity between the two countries to 5 GW. The project is currently expected to be completed by 2027. Additionally, the countries are investing in reinforcements to existing interconnectors.
When it comes to the use of France-Spain interconnectors, power has mainly flowed into Spain. Spain has been a substantial net importer of French electricity every year since 2016, with 12.4 TWh of net yearly imports at peak in 2017. This year will show a significant change with Spain a net exporter to France every month in 2022 except for February, amid a large shortfall in French nuclear generation. From 2016 to 2022, Spain was a large net importer of cheap French nuclear power, while in 2022 Spain had the flexibility to increase mainly gas-fired power generation to support French consumers amid the energy crisis. This further highlights the benefits of increased interconnectivity for both countries. Furthermore, Spain is currently one of the largest generators of renewable power in Europe and has an impressive pipeline of renewable energy projects, while a substantial proportion of electricity exported to France so far in 2022 has been solar and wind.
Unlike Spain, France has not planned to increase the share of renewable energy sources in its power mix to the same extent. The situation with nuclear power in France is expected to improve in 2023, which will also benefit Spain. With more interconnectors between France and Spain, the two can rely on each other during periods when their power production is low. Given the abundant renewable energy power that will be produced in Spain, France will then be able to import clean, renewable energy when the sun shines and the wind blows. On the other hand, Spain will be able to import stable and dispatchable energy from France’s nuclear reactors to fill the intermittency gaps when the weather is less favorable. In other words, expanding high-voltage connections between the two power grids will benefit both countries and the wider European region.
This begs the question: is enough interconnector capacity being developed in Spain and France compared to the pace of renewable installations? The timelines of the interconnector projects are very long, as shown by the Bay of Biscay project, which is expected to take 10 years from initial consultations started in 2017 until it is expected online in 2027. As an illustration, 5 GW of transmission capacity will be able to interchange roughly 40 TWh per year if used at very high utilization factors – a substantial amount, but relatively small compared to total power demand in both countries. Both countries' power demand is also expected to increase rapidly after 2025, as the electrification of their economies continues. Furthermore, the Spain-France example is just one of many. Many of the same questions will arise in other parts of Europe, especially as the North Sea is emerging as another European energy hub with hundreds of gigawatts of capacity planned to come online in the coming decades. Therefore, both policymakers and the power sector should carefully examine if a country’s development plans for new generation capacity match with its development plans for both internal and cross-border transmission capacity. The timelines for new projects are very long and Europe simply cannot afford grid bottlenecks halting its energy transition plans.
Benjamin Netanyahu says he has formed new Israeli government
Country’s longest-serving prime minister set to preside over most rightwing administration in country’s history
Israel’s longest-serving prime minister Benjamin Netanyahu has said he has successfully formed his next government, which is expected to be the most rightwing administration in the history of the Jewish state.
“I have a government in hand,” Netanyahu said in a call with President Isaac Herzog, less than an hour before a midnight deadline that would have seen his mandate to establish a government expire.
The new government will be sworn in late next week or at the start of the new year, returning Netanyahu, a divisive and ruthless political operator, to power after 18 months in opposition. It will be his sixth term as prime minister, extending his more than decade-long dominance over Israeli politics after the country went through five elections in three and half years.
The new government is already shaping up to be Netanyahu’s most controversial as it includes anti-Arab ultranationalists and self-declared homophobes.
According to coalition agreements already made public, Netanyahu will appoint Bezalel Smotrich, an ardent supporter of Jewish settlements in the occupied Palestinian territory, as his finance minister. He will also grant Smotrich’s far-right Religious Zionism group a second ministerial post in the defence ministry, which will give him sweeping administrative controls in the occupied West Bank.
Smotrich is a proponent of the annexation of Palestinian territories and a self-declared homophobe. Most of the international community considers Israeli settlements in occupied territory to be illegal.
Netanyahu has also agreed to appoint Itamar Ben-Gvir, another ultranationalist leader, as national security minister, with expanded powers. This will give Ben-Gvir, who was convicted of incitement to racism in 2007, powers over the Israeli police, as well as border police who operate in the West Bank.
Ben-Gvir, who was once a disciple of the late rabbi Meir Kahane whose anti-Arab ideology was so extreme his movement was labelled a terrorist group by the US, has also demanded that the rules governing the use of live fire by Israeli security forces be loosened.
He also wants restrictions to be lifted on Jewish prayer at Jerusalem’s Al-Aqsa Mosque compound, known to Jews as the Temple Mount. The religious site, known to Muslims as Haram ash-Sharif, or Noble Sanctuary, has often been a flashpoint in the Palestinian-Israeli conflict.
Netanyahu sparked an outcry this month after he named Avi Maoz, an extreme religious-nationalist known for his anti-LGBTQ views, to a deputy ministerial post with responsibilities over education curricula in secular schools.
The incoming government has also floated plans to curtail the independence of the judicial system, including the supreme court.
The attorney-general, Gali Baharav-Miara, warned last week that if such plans were enacted, Israel would “be left with the principle of majority rule alone. That and nothing more, democracy in name only but not in substance.”
Netanyahu is still on trial for charges of bribery, fraud and breach of trust. He has always maintained his innocence, but legal and political analysts speculate that he may try to halt the trial or have the indictments thrown out entirely, via parliamentary legislation.
Netanyahu has tried to soothe domestic and international fears about his new government, saying that the “status quo” governing religion and state will be upheld and that he, as the longest-serving leader in the country’s history, will be dictating policy.
But others believe he will be constrained by the politics of his coalition.
“He can’t force his will on everything — he has a coalition to maintain and a cabinet to manage,” said Tal Schneider, political correspondent for the Times of Israel. “People like Ben-Gvir and Smotrich are methodical and the direction they want to lead Israel in is clear. I’m also not convinced that Netanyahu necessarily wants to block all these steps either.”
Last month’s poll returned an unexpectedly clear majority for Netanyahu’s Likud party and its Jewish ultra-Orthodox and far-right allies. The result came after Netanyahu, who is still on trial for corruption charges, brokered the deal that brought Ben-Gvir and Smotrich into an alliance, propelling the pair from the extremist fringe to the mainstream.
It was a big year for the space industry. 2023 will be even bigger
Another blockbuster year for the space industry draws to a close. In fact, 2022 may have been the most blockbuster year for space in recent memory — since 1969, at least. The historic cadence of SpaceX, the launch of Space Launch System and the return of the Orion capsule, big technical demonstrations, ispace’s fully private moon mission … it’s been a momentous year.
There’s a lot to look forward to — so much, that next year could even outdo this one as the biggest for the space industry yet. But many questions still remain, especially about the shorter-term economic outlook, ongoing geopolitical instability and (ahem) some announced timelines that may or may not come to fruition. Here are our predictions for the space industry in 2023.
1. More pressure on launch
It seems clear that there will be increasing pressure on the launch market as even more next-gen vehicles come online. We’re not just looking out for the heavy-lift rockets — like SpaceX’s Starship and United Launch Alliance’s Vulcan — but a whole slew of smaller and medium-lift launch vehicles that are aiming for low cost and high cadence. These include Relativity’s Terran 1, Astra’s Rocket 4, RS1 from ABL Space Systems, Rocket Factory Augsburg’s One launcher and Orbex’s Prime microlauncher. As we mentioned above, space industry timelines are notoriously tricky (and this caveat applies to the whole post) but it’s likely that at least a handful of new rockets will fly for the first time next year.
Proving new vehicles drives prices down and increases inventory, meaning more launches and dates are available to private and government concerns — and incumbent players will need to work hard to keep the lead they’ve established.
2. Big developments from the UK, China and India
The international space scene will continue to grow. While there’s much to look forward to from Europe, we’ve got our eyes on the United Kingdom, China and India. From the U.K., we expect to see the country’s first-ever space launch with Virgin Orbit’s “Start Me Up” mission from Spaceport Cornwall. We are also expecting a lot of activity from the Indian Space Research Organization, as well as the launch startup Skyroot there. China had a big 2022 — including completing its own space station in orbit and sending up multiple crews of taikonauts — and we predict there will be no slowdown next year as the country seeks to keep pace with American industrial growth.
How exactly the decentralizing of private space beyond a handful of major launch providers and locations will affect the industry is difficult to say, but it will definitely help diversify the projects and stakeholders going to orbit.
3. Continued growth for satcom and earth observation
Image Credits: Pixxel
Similar to launch, we’ll be seeing even more large and small satellite constellations going up next year that will put pressure on the satcom and earth observation (EO) industries. Just two examples: Amazon’s long-awaited Project Kuiper will likely see its first launches next year, and Pixxel will be launching six high-resolution hyperspectral imagery satellites in the latter half of the year.
Most estimates assume that both satcom and EO will experience more growth throughout the decade, so we’re not expecting newer entrants to squeeze out existing players. But we do think that we’ll see even greater adoption of, say, Starlink or sat-to-cell services here on Earth, as well as even greater relevance for earth observation technologies in sectors like agriculture and mining and for understanding climate change.
4. Capital management will help decide winners and losers
The macroeconomic environment is poor. High inflation, high interest rates and high risk aversion means that cash is more expensive than ever. We see this trend slightly abating, but not completely, so we predict that capital management will be a huge determining factor in startup survival. Investors will also be looking for technical differentiators and real market potential more than ever before.
“One thing the market has changed a bit is, when you’re doing your technical diligence, I think it’s more important than ever that the company that you’re backing has a very clear technical differentiator and advantage,” Emily Henriksson of Root Ventures said on stage during TC Sessions: Space earlier this month.
In the space industry especially, we saw a real investment slowdown in 2022. Many space companies that went public via SPAC merger continue to underperform. In 2023, it will be all about managing debt, institutional bloat (and possibly, sadly, more layoffs) and capital management.
5. Private astronauts will hit record numbers
Image Credits: Mario Tama / Staff / Getty Images
Private … astronauts? Ten years ago, that phrase would’ve been nonsensical. But no more: In 2022 alone, nearly 20 people went to suborbital space aboard Blue Origin’s New Shepard rocket and four people flew to the International Space Station with Axiom Space’s Ax-1 mission. Next year, we anticipate these numbers will be even higher. Not only will Polaris Dawn, billionaire Jared Isaacson’s private spaceflight program, make its maiden mission; Axiom will be conducting its second private launch to the ISS early next year.
In 2021 a ticket to space barely existed; in 2022 it became merely unusual; in 2023 we will probably get tired of hearing about it! Expect to hear more about the next big milestone in space tourism, privately accessible space stations, next year as well, but don’t expect any serious movement there until companies figure out how to make the business work.
6. More activity on the moon and cislunar space
This year is coming to a close with ispace’s Mission 1, the world’s first fully privately funded and built moon lander mission. But that’s just the beginning. Next year, look out for even more landers heading to the moon — we’ve got eyes on Firefly Aerospace’s Blue Ghost lander and Astrobotic’s Peregrine — and even more infrastructure moves to cislunar space.
As more lunar tech companies make progress on their goals, the ones that don’t will become even more conspicuous. Mergers and acquisitions in this space would not be a surprise.
7. Even more emphasis on American manufacturing as supply chain crisis continues
Our final prediction is a broader one, but has big implications for the space industry. We see investors and founders placing an even greater emphasis on domestic supply chains and manufacturing in 2023, and this will likely only intensify if relations between the U.S. and foreign governments — China in particular — further sour.