Google Buys a Combined Stake in SpaceX with Fidelity

September 28, 2017 – 07:17 am

Zacks Equity ResearchAs a part of its efforts to provide Internet access for the entire world through satellites, search giant Google Inc. (GOOGL - Analyst Report) together with Fidelity Investments has invested $1 billion in Space Exploration Technologies Corp., a rocket making startup run by billionaire Elon Musk.

The investment will fetch both the companies a combined stake of 10% in the startup. The other investors in the company include Founders Fund, Draper Fisher Jurvetson, Valor Equity Partners and Capricorn.

SpaceX, founded in 2002, is a private spacecraft venture, which designs and makes rockets and spacecraft. The company was established with the intent of making it possible for people to live on other planets. SpaceX's ultimate goal is to create advance rocket and spacecraft technology and gradually build a city on Mars. The investment values the company at around $10 billion.

Google has been striving to diversify its revenue base and explore growth outside search. With the investment in this latest technology, Google is trying to broaden its efforts to make the Internet available in remote areas of the world. Its other efforts include high-altitude hot-air balloons called Project Loon and solar-powered drones.

The spread of connectivity will help Google to bolster its user base and sell more digital advertising. Google’s teaming up with SpaceX, supplements similar efforts by rival Facebook (FB - Analyst Report), which is also working on plans to connect the world using drones and satellites.

Another company in the race is Richard Branson's Virgin Group, which partnered with Qualcomm Inc. (QCOM - Analyst Report) to invest in OneWeb that has plans to launch broadband-capable low-orbit satellites.

Google currently has a Zacks Rank #3 (Hold). Inc. (SOHU - Analyst Report) which sports a Zacks Rank #1 (Strong Buy) is a better-ranked stock from the same sector.


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