Private space companies are paving the way for the industry to profit, says the man behind the Procure Space ETF (UFO).
By participating in the rapidly evolving “space race” billionaire-backed companies like SpaceX by Elon Musk and Blue Origin by Jeff Bezos are cutting costs across the board, Andrew Chanin, CEO of ProcureAM, told CNBC’s “ETF Edge” this week.
“You are able to lower the cost of launch, and that will allow more companies to send things into space cheaper,” Chanin said in an interview on Wednesday. “They are really opening up the whole environment for space companies and future potential space companies to lower those barriers to entry.”
They also cut the cost of government-sponsored space programs by competing with each other for NASA contracts, Chanin said.
“You’re actually freeing up more of NASA’s budget to invest in other areas of space,” he said. “This competition is very healthy in my opinion. Not every company will necessarily be a winner, but hopefully this competition can bring the prices down and also bring in the best technology.”
NASA now also has contracts with more than 300 listed US companies, said Chanin, whose UFO ETF Loral Space & Communications and Gilat Satellite Networks are among the two largest holdings.
“It’s not necessarily a pure space company to get a deal,” said the CEO. “It really opens up opportunities for everyone.”
Because of this, it’s important to look beyond notoriety in this particular area of investment, said Matthew Bartolini, director of SPDR Americas research at State Street, in the same “ETF Edge” interview.
State Street is offering the SPDR S&P Kensho Final Frontiers ETF (ROKT), the first space ETF to hit the market. The fund’s three largest holdings are Maxar Technologies, Virgin Galactic and Aerojet Rocketdyne.
Bartolini recommended “not only to look at the soaring names like SpaceX or Blue Origin in the private markets, but also to show which companies in the public markets help to supply them”.
Aerojet Rocketdyne, which defense giant Lockheed Martin is buying in hopes of competing with private space companies, played a key role in launching Blue Origin’s New Shepard rocket, Bartolini said.
“You can only see the derivative effects of a private company affecting the public markets with this one example from Lockheed and Aerojet,” he said. “It helps highlight the opportunity you see in space.”
Given that space companies are welcoming greater efficiencies, more government support, and more commercial applications on Earth in areas like satellite technology, that opportunity is likely to grow and continue to penetrate public markets, Bartolini said.
Morgan Stanley said the global space industry could reach over $ 1 trillion in sales by 2040. Worldwide sales are currently around US $ 350 billion.
UFO and ROKT both fell more than 1% on Friday. UFO is up over 14% since the start of the year, while ROKT is up nearly 2%.
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