Space stocks have been in the news throughout 2021, including Ark Funds' ARK Space Exploration & Innovation ETF ARKX and the continued development of the space industry.
Benzinga had the chance to talk to Andrew Chanin, the CEO of Procure Holdings. Chanin is behind the first pure-play space ETF, the Procure Space ETF UFO.
Why a Space ETF?: In April 2019, Procure launched the first pure-play space ETF. Chanin saw an opportunity to develop an index in an industry that was maturing and wanted to be first to market.
“Space was a theme that was being dramatically overlooked by Wall Street,” Chanin said.
The ETF manager connected with a group that helped launch the underlying index. A member of the group wrote the definition of what the space economy is, which is a key feature of the UFO ETF and its assets.
Chanin said he “wanted to make sure a space ETF had space companies.”
The team behind the underlying index selects the companies which must have at least 50% of their revenue from the space industry to make up the components of the index.
Growth of Space: Chanin said that the space industry continues to grow and the entry of reusable rockets is significantly driving down launch costs. A trickle-down effect is making it “significantly cheaper for government and companies to access space.”
Satellites can do more today and are more technologically advanced, and “That opens up tremendous business opportunities," Chanin said.
Interest in space stocks and the growth also led to the Procure Space ETF hitting $100 million in assets under management in February 2021.
More pure play space companies could be added to the index and ETF in the future with several going public via SPAC. The index has changed with new sectors such as space tourism being added to the industry.
Virgin Galactic Holdings SPCE is in the index, an ETF and a former SPAC. Chanin said the index won’t add SPACs until they have completed the merger process.
In the space industry, SPACs might need a vote for approval from shareholders and also from the government if they have certain contracts, Chanin said.
Differences From Ark: The Ark Space Exploration & Innovation ETF launched this week and brought lots of attention to space stocks and space ETFs.
“Ark’s copying and throwing an active twist on another concept I’ve brought to market before was not completely shocking,” Chanin said was his initial reaction when Ark filed for the new space ETF.
The ETF manager mentioned he brought the first fintech ETF and a health tech ETF to market which have since been copied as active ETFs.
There are some main differences between the Procure Space ETF and the new Ark space ETF.
"Our index is rules-based," said Chanin
While Ark offers an active ETF, Chanin told Benzinga that the UFO ETF is not passive. Analysts are putting in time and effort throughout the quarter. Chanin said it is more of a methodology versus point of view matchup of the ETFs instead of active versus passive.
“Our ETF is focused on actual space companies, not those that can be interpreted with relations to space,” he added.
When launching the Procure Space ETF, Chanin said the SEC required the fund to include at least 80% of holdings that were pure-play space companies with 50% of revenue from the sector.
Chanin said that the reason for the inclusion of the word “innovation” in the new Ark Funds ETF could have to do with this.
“I’m not going to knock their selections,” Chanin added, but told Benzinga that if someone wants to invest in actual space companies, there’s the UFO ETF.
Price Action: Shares of the Ark Space Exploration & Innovation ETF were up 1.39% at $20.86 on Thursday.
Shares of the Procure Space ETF are up 1.54% at $28.97. The UFO ETF is up 12% year-to-date in 2021 and up over 60% in the last year.
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