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The flood of young companies into the $400 billion space industry is sparking investor interest but there’s a common issue: A lack of public U.S. companies that generate the majority of revenue from space business.
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“The space industry is one that is still fairly new as far as corporations and the commercial viability of companies in space go,” Andrew Chanin, co-founder and CEO of ProcureAM, an exchange-traded product issuer.
SpaceX, Blue Origin, Rocket Lab, Virgin Galactic and others are some of thetoo most talked about names among these space companies. But those companies are not available to the majority of investors.
“Although there might be private companies that are working on new technologies, it’s really difficult to get access unless you’re an extremely affluent investor,” Chanin said.
That’s why Chanin partnered with Space Investment Services, run by former Space Foundation director of research Micah Walter-Range, to develop the Procure Space ETF, ticker UFO. The exchange-traded fund of 30 companies gives everyday investors a way to own a stake in the growing space economy. UFO also focuses as much as possible on “pure play” space companies, Chanin said, as roughly 80% derive the majority of revenue from space businesses.
“UFO provides, compared to other types of investment vehicles, a relatively low cost and diversified away to invest in this specific theme,” Chanin said.
UFO is not limited to U.S. companies, Chanin noted. He said he believes that investors need to “access this industry by investing in global companies,” so UFO “opens up the universe, pun intended, of companies that can be included.” The ETF includes everything from satellite communications companies – such as Iridium, Inmarsat, SES – to industrial manufacturers – Harris, Airbus – and more.
The emphasis on largely “pure play” companies is key and Chanin touted UFO as having an advantage in that regard. Large aerospace and defense companies like Boeing and Lockheed Martin have space businesses generating billions of dollars but are a small piece of the contractors’ overall pies. Chanin pointed to Boeing’s stock slide following its issues with the 737 MAX aircraft as an example, saying that space investors wouldn’t want too much exposure.
“That caused a massive hiccup to the stock, and that is something independent of their various space programs,” Chanin said of Boeing.
The index is also “now the official benchmark of the space industry by the Space Foundation,” Chanin said. The Space Foundation is a nonprofit organization, which also hosts one of the world’s most widely attended space conferences in Colorado. UFO’s index is also the first ever “Space Foundation certified space data product,” Chanin added.
Investment continues to flow at a breakneck pace into these private space companies. Space Angels, a New York-based investment firm, released a report last week that more than $20 billion has been invested over the past decade into 435 space companies. Space investments have only accelerated, as the first quarter of 2019 saw 29 rounds of fundraising send $1.7 billion of equity into companies, according to Space Angels – nearly double the previous quarter.
SpaceX, OneWeb, Amazon and more are pouring resources into developing ambitious satellite internet networks, which Space Angels pointed to as a major driver of recent investment.
“If the first quarter is any indication, 2019 is going to be another massive year for the Space economy,” Space Angels said in the report.