Space ETF Seeks to Boldly Go Where Industry Has Never Been

It was to the moon and back. 

Volume in the Procure Space ETF (UFO) rocketed 54 times on Sept. 7 from the previous day, to nearly 280,000 shares before returning to earth the next day. The reason trades in the aerospace and defense fund leapt to $5.8 million from $105,000 the day before: Apple. 

Apple Inc. announced the launch of the iPhone 14 that day, and it includes a feature sure to warm investors who are boosters of the coming space economy. The new phone includes a satellite-enabled Emergency SOS feature that allows it to connect with a satellite when out of range in order to send text messages to emergency services.  

Andrew Chanin, CEO and co-founder of Procure Asset Management, joined ETF.com’s Heather Bell and Sumit Roy for the Exchange Traded Fridays podcast last week to discuss the big day for UFO and other things space-related. 

UFO, with $60 million in assets, may have initially drawn the attention of investors seeking to trade in space industry stocks that were halted when the Apple announcement was made, Chanin said.  

“When this news came out, numerous stocks in the space industry were halted,” Chanin said. “It was around that time that we started seeing significant volumes moving into UFO; it seems as if it's possible that someone or multiple entities are looking to trade UFO as a proxy to these halted satellite-related companies.”  

Other investors may have noticed that UFO holds GlobalStar (GSAT), and Chanin called the Apple news “a major win” for UFO. GSAT volume jumped more than five times that day, and while the price surged throughout the day, it finished lower. UFO was down nearly 23% year to date through Sept. 14; GSAT was up 60% during the same period. 

A Multifaceted Industry 

Still, investing in a space-oriented fund like UFO is more than a bet on Mars travel and asteroid mining, Chanin says. 

“This is an industry that allows for numerous perspectives on investing strategies. But it is something that is extremely interconnected to our everyday lives already,” Chanin said of the argument for investing in space-related stocks.  

“Anyone that’s using a smartphone is—in probably numerous ways—utilizing satellite technology,” he added, citing how shrinking costs, including the advent of reusable rockets, lowered the boundaries to entry in the industry.  

Private industry playing a greater role in space also means that these investments are about more than exploration. Space programs were funded entirely by government agencies in the past and now they represent about one-fifth of overall space economy spending. 

“The opportunities that we're seeing now in the space industry have really opened up. We have many more pure-play publicly traded companies out there,” he said, adding that defense is a major part of why people want to get involved in space investments. 

“The military and defense part of space is becoming extremely important, as we've seen with the Ukraine war, because satellite companies were the first ones that helped us see the actual troop and supply buildup on the Ukrainian border before the actual invasion occurred,” Chanin noted. 

Traditional aerospace and defense companies are capped at 20% of UFO’s underlying index, while the remainder of the fund is focused on pure-play securities in the space industry. 

“Everyone has a different definition of space. Some people might see space as sending robots to other solar systems to gather information, but that type of thing is such a small piece of what the space industry is today,” Chanin explained. “A lot of what the space industry is today is communications. That has been a big driver for the space industry over the past several decades.” 

Analyst projections regarding the size of the space economy, according to Chanin, can vary greatly, with some predicting more than $1 trillion by 2040 or $2.7 trillion by 2045. 

“One of the common threads [among analysts] is they believe that communications and connectivity will continue to be one of those larger drivers to get the space economy to those sizes,” he added. 

Contact Heather Bell at [email protected]