The EventShares Policy Playbook series is a group of concise, client-friendly research reports highlighting key policy investment themes. Each Playbook covers background of the policy, U.S. industries and companies impacted, and the emerging opportunity.
The U.S. Space Force Playbook provides an in-depth overview of the policy, the size of the market opportunity, the investment case and timing. Download the full PDF to read the entire report.
Policy Overview: What's Happening?
The U.S. Space Force (USSF) is the proposed space warfare branch of the U.S. military. It would serve as the lead military service for space operations. The proposed military branch's roles would include operating missile warning systems, performing reconnaissance, operating imaging satellites, and maintaining space situational awareness, which involves keeping track of where orbiting bodies are to avoid collisions. The Trump administration viewspace as crucial to U.S. GPS and technology networks.
The Numbers: Size of the Opportunity
- $2 Billion - Estimated additional cost of implementation over 5 years
- $12.5 Billion - Current total budget request amount for DoD space activities FY2019
- 60+ Organizations - Approximate number of military space organizations that would be consolidated under one roof
Our Take: The Investment Case
While USSF could be a large and crucial military branch in the future, it won’t increase defense spending in a material way in the immediate future. As envisioned by the Trump administration, the USSF would initially be a reorganization rather than a new set of defense operations. The estimated $2 billion cost is a drop in the bucket compared to the $718 billion the DoD requested for FY2020. Most of these costs will come from setting up a new headquarters, a U.S. Space Command, and hiring personnel over a five year roll out period.
After the five year roll out period, space operations are set to expand. There is an ever-increasing need for greater space capabilities, and under the new proposed structure, Space Force will be an advocate for more space spending and research. It is important to note that the process of building and supporting the USSF could take anywhere from five years to two decades.
A new military branch with a budget in the billions could be a significant investment opportunity. However, finding the companies supporting the USSF will likely be difficult due to the relative age of space exploration. Many space related companies are either private or diversified beyond strictly military space operations (e.g. Google's SpaceX stake). For example, Boeing business lines include space products, but the company's main business line sells commercial aircraft. In addition, much of the DoD’s space capabilities are classified, so it is impossible to get a full picture on contracts awarded and suppliers involved. All of this means that finding a pure play firm to capitalize on Space Force will be difficult. That being said, many of the well-known defense primes like Boeing, Raytheon, Lockheed Martin, etc. have major space operations and may be the optimal way to gain exposure to space.
Timing: Significant Actions Taken & Next Steps
The Trump administration first proposed a USSF as part of its FY2020 budget request. The proposal was initially met with skepticism by lawmakers, defense officials, and media members. In our view, this means any new USSF will take a while to work through the legislative process. There will be budgets to pass and oversight mechanisms to formalize. Both will require lots of negotiation before the USSF is ready to operate. The point to remember is that the legislative gears of Washington tend to move slowly, especially on changes a large as building and operating a new military branch.
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