Space Stocks' Fall back to Earth
February 27, 2022
In 2021 the world saw a new level of commercial space exploration achieved. Some of the notable achievements of these companies include Virgin Galactic starting flights in the thermosphere, Blue Origin starting flights by sending Jeff Bezos to space. In addition to these achievements several other companies that are in the space exploration and development industry went public including Virgin Orbit, Rocket Lab, Astra Space, Redwire, and Momentus.
These companies then saw massive investments. One driving force behind this investment was internet forums such as Reddit. Many individuals were intrigued by space and their intrigue and enjoyment compounded through online discussion. One such company that was particularly impacted by this "meme stock" phenomenon was Virgin Galactic. Virgin Galactic saw a correlation between retail inflows and mentions of the company in these forums.
One main reason that these space startups stocks are so popular is that they are a way for individual investors to purchase stock in a company that singularly focuses on space. Competitors for these startups, such as Boeing, are trying to develop similar technologies, but space only makes up a piece of what those companies are pursuing. Another reason that meme stocks are popular is the sense of community that they offer. To many that invest in meme stocks, the communal interaction online is just as important as the underlying investment.
However, meme stocks come crashing down as online popularity fades. Space startups have experienced a decline in online mentions fueling share prices dropping. As share prices drop these stocks then further lose online support and it becomes a loop. One reason why these crashes are negatively impacting these companies is that high valuations are crucial to increase the chance of success. An example is Virgin Galactic which needs cash to start operation, as share prices decline it becomes more expensive for the company to start operation.
Overall, the decline in share prices for meme stocks is somewhat inevitable as online mentions drop. It will be interesting to see in the coming years which of these companies survive and if any can achieve the share prices they once had when they were meme stocks.