TOKYO - Space junk removal startup Astroscale is targeting a Tokyo listing as early as June, sources said, taking the high-profile venture public in a sector with out-of-this-world prospects and down-to-Earth risk.

The 11-year-old Japanese company spoke to overseas institutional investors in March to gather feedback before making a decision on a listing, said two people familiar with the matter, declining to be identified as the information is not public.

The lead managers are Mitsubishi UFJ Morgan Stanley Securities and Mizuho Securities, the people plus a third person said.

Founded by ex-government official Nobu Okada, Astroscale has won government backing in Japan, the U.S. and Britain as it develops technology to remove orbital junk such as disused satellites and spent rockets which are seen as a collision risk.

The firm considered going public last year but postponed due to factors including a mismatch over valuation, and may push it back again depending on investor feedback, one of the sources said.

Astroscale, which is also developing technology to extend the life of satellites, sees ispace as one reference for a potential valuation. The moon explorer listed last year and is worth around $450 million after a recent share slide.

Astroscale did not reply to requests for comment by email and phone. Mitsubishi UFJ Morgan Stanley Securities and Mizuho Securities declined to comment.

RISK TOLERANCE

The government is fostering its space sector with backing for startups as well as industry heavyweights like Mitsubishi Heavy Industries, as it works with the U.S. and competes with China.

It aims to double the size of the domestic space sector to 8 trillion yen ($53 billion) by early next decade.

In listing, Astroscale would follow in the steps of ispace as well as satellite imaging firm Institute for Q-shu Pioneers of Space (iQPS), whose share price has risen more than 700% since its December initial public offering.

"Space startups are booming and will be popular among retail investors" amid attention on space firms as governments offer backing to the sector, said analyst Kazumi Tanaka at DZH Financial Research.

However working out business forecasts for some is difficult, he said.

Though market sentiment is generally positive with the Nikkei share price average at near record highs, institutional investors look at the space sector critically due to the risk involved, one source said.

Last month's explosion of the Kairos rocket from Japanese launch firm Space One underscored the dangers.

Tokyo-based ispace suffered failure with its Hakuto-R moon landing mission in April last year. It issued new shares last month to overseas investors and raised 8.4 billion yen, but only after halving the number of shares.

One foreign institutional investor who participated in the offering said the stock was not one to be held long term due to the unclear business outlook.

The investor has already sold the shares, they said.

"From the perspective of institutional investors entrusted with money and looking at market risk-return, ispace clearly exceeds their risk tolerance," said one of the sources.

The price of ispace shares has fallen almost a third since the start of March and is trading below the 871 yen issue price.

"We are extremely proud of the confidence that both retail and institutional investors in Japan and around the globe have shown in ispace," the company said in a statement, adding that it has a robust business plan with achievable goals.

A second ispace moon lander mission is scheduled to launch this year. The firm will start a NASA-sponsored moonshot in 2026. ($1 = 150.9000 yen)

(Reporting by Sam Nussey and Miho Uranaka; Additional reporting by Kantaro Komiya; Editing by Christopher Cushing)