Could space be the next stock boom? Investing in space carries substantial risks and rewards as the industry is relatively new and in exploration stages. With SpaceX’s recent successful launch of the Crew Dragon, we grow closer to living in a world with space tourism, off-world mining, or even colonization on Mars.
Investing in the next stock boom, whatever it may be, can potentially bring huge rewards. To maximize those potential earnings, you may want to consider investing using retirement funds in an IRA. In an IRA or 401(k), any gains are sheltered from capital gains tax and can continue to grow tax-deferred until they are distributed. With a Roth IRA, your earnings may be distributed tax-free.
Here are some ways you can invest in space.
PRIVATE SPACE COMPANIES
There are quite a few private space companies such as Elon Musk’s SpaceX, Jeff Bezo’s Blue Origin, Moon Express, ConsenSys Space, and Skywatch, to name a few. However, investing in a private space company is not as easy as clicking a button and buying stock. To invest in a private company, you will first need to identify the company and then wait for them to make a share offering to raise capital or find a hedge fund/venture capital firm.
Private space companies can be a much bigger risk as they are illiquid (not traded on an exchange), require long investing time frames, maybe in development stages, and may never be profitable. Additionally, you may need to qualify as an Accredited Investor to participate in the offering.
If you are looking to invest in a private space company through your IRA, don’t go asking your brokerage firm to do so. It is likely not in their business model, and they will not be able to hold the investment for you.
This is where Midland comes in. We specialize in holding alternative investments such as real estate, promissory notes, futures/forex, and private stock. Midland will be able to hold your investment and do the necessary recordkeeping and reporting to the IRS, allowing you to invest in private space companies with your IRA.
PUBLICLY TRADED SPACE COMPANIES
Many of the publicly traded space companies considered “space” investments make engines, rockets, and satellites that we see, or will see, in space. These companies include Boeing (BA), Lockheed Martin (LMT), Northrop Grumman (NOC), Aerojet Rocketdyne (AJRD), and Maxar (MAXR). There is also Virgin Galactic (SPCE), which is developing commercial spacecraft and aims to provide suborbital space flights and launches to space tourists and for scientific missions. You can also invest in companies that are related to the space industry. For example, you could invest in companies that create technologies, vessels, and equipment used by private and publicly traded space companies. For instance, Midland has handled private investment transactions with a company that makes composite pressure products for the aerospace industry.
Although Midland specializes in Self-Directed assets, such as private placements, we can also hold a brokerage account as an asset within your Midland account. This will allow you to trade publicly traded stocks while keeping everything under the Midland umbrella.
MIDLAND TRUST IS NOT A FIDUCIARY: Midland’s role as the custodian of self-directed retirement accounts is non-discretionary and administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.
AUTHOR: Andy Anger, Senior Associate in Client Services at Midland Trust