Space tourism is ‘a small part of the overall space economy,’ ProcureAM CEO says

Andrew Chanin, ProcureAM co-founder and CEO, joins Yahoo Finance Live to discuss how Bezos's Blue Origin has attracted investors and the outlook for the space industry.

Video Transcript

- Another rocket went into the-- up to the edge of space this weekend. This was a Blue Origin rocket, and among the passengers, were the football star turned TV host Michael Strahan. So another win for Blue Origin, but really, we have been seeing these flights kind of pile up. What does it mean for investing in space? Let's bring in Andrew Chanin. He's co-founder and CEO of ProcureAM, which has the UFO space ETF. I love that ticker, one of my faves.

So it's good to see you, Andrew. So obviously, these are very public examples of what space travel can look like. Although, they are privately held companies, but what kind of enthusiasm are we seeing around this investment space as we see those kinds of events?

Andrew Chanin: So space has taken a lot of investor interest of late, but right now what we're talking about with Blue Origin and what we saw this past weekend is space tourism. And this is really an industry that started becoming popularized only in 2021. And so it's a very new industry, one that's been decades in the making. However, analysts are seeing that-- are expecting this industry to be roughly $3 to $4 billion annually by 2030. And that would make it, based on today's numbers, less than 1% of the overall space economy.

So yes, it's very exciting, and we're seeing high profile people, celebrities, billionaires, going to space. And we're seeing more entrants coming into the space, but this still is just a very small part of the overall space economy.

- And Andrew, to that point, there seems to be a lot of other positive developments in data service companies launching satellite flights into space. What are some of the companies that we may not be so familiar with that are doing some good things?

Andrew Chanin: Well, so there are a lot of different companies. Some are pure play companies. Some just specialize in small areas. When you look at something like UFO, you're looking at over 30 publicly-traded companies from around the world, focusing on different areas of space. You have, also, some of your large defense contractors. So think your Lockheed, your Raytheons, your Northrops. Although that's a small weighting within the overall UFO portfolio, they're getting numerous government contracts to create different types of things.

So we've seen talks about Russian and Chinese hypersonic missile defense capabilities being something that are very important because the US may be in the process of getting leapfrogged when it comes to hypersonic weapons. Well, the US government is working with the likes of those just mentioned, Lockheed, and Raytheon, and others, to try to build up defense capabilities for these hypersonic missiles. So on the defense side, this one really big area, but then certainly, you look at the actual satellite companies, like a Eutelsat, an EchoStar, SES, and then even the manufacturers of satellites like Maxar.

So even though Maxar might not be sending up a satellite, many companies are hiring Maxar to build those satellites that they'll use once those satellites get sent into space. So there are many different types of companies and technologies, and that's why we actually created something like UFO to provide exposure to the many diversified areas that are the space economy.

- Andrew, I have to admit, I'm surprised that that UFO hasn't gained more this year. I think it's up about 8%, or so. Again, given the sort of enthusiasm and attention in this space, what do you think could be holding back bigger gains? Is it an idea that if you're looking at some of these companies, maybe they carry a lot of debt, and we're looking at interest rates going higher? What do you think is going on?

Andrew Chanin: Well, so there are all different sorts of things. Just one one company, Viasat, last month had announced that they're looking to do a takeover of Inmarsat and to buy up all their technology. And that was something where that stock was trading significantly higher than where it was now, but the market didn't necessarily love that it was going to cost them roughly $7 billion or so of their money to be able to go and make that acquisition. So yes, there are some expensive deals that potentially are out there.

Definitely with the recent interest in space from the SPAC community, we've also seen some of these private companies gain a lot of interest, as well. Certainly, recent rounds of SpaceX have hit record valuations for that company, as well. In the private side, we're seeing a lot of interest. And more companies are going public, a lot of them via the SPAC, and then de-SPACing into the public markets. But there's many different types of companies. Some of the non-pure plays may have benefits or hindrances from other areas that may not absolutely have to do from space.

But that was certainly one of the areas that was difficult for the overall portfolio, the way that investors reacted to the announcement of the Inmarsat deal by Viasat.

- And Andrew, there's been some chatter down in DC about potentially taxing commercial space travel. Should that come to fruition, does that impact capital-raising in the space, and does that impact ETFs like yours?

Andrew Chanin: Oh, it certainly could to to the extent that you have exposure to those companies. So Virgin Galactic right now is a fairly pure play space tourism company, and it's aiming to bring up many of these billionaires to space. Something like a Blue Origin that's sending up its New Shepard rockets, well, those have you know other purposes, as well, beyond just taking up passengers for space tourism. They also use these technologies to send capsules for resupplies to the International Space Station. They're also working on other technologies that are beyond just space tourism.

So to the extent that a company is a solo focus on sending extremely wealthy people to space for space tourism, that absolutely could have a negative effect. But there are also many other types of space tourism ventures that are being worked on right now like orbiting hotels and things like Orbital Reef, where you can have an orbiting space station where you can do research, and you can do experiments, and you can do training. But you can also do tourism, as well. So we're seeing more diversified approaches for companies looking to enter into the space tourism realm.

So to the extent that that the tourism aspect becomes a smaller percentage of what they're doing, maybe that would mitigate some of the overall effects of some type of billionaire space tourism tax idea.

- Speaking of billionaire space tourism, one billionaire space tourist that didn't get as much attention here in the US was a Japanese billionaire who didn't just go up to the edge of space. He went to the ISS, the International Space Station, and made a visit, which is pretty incredible. And I wonder, when people were looking for exposure, a lot of the tension among American investors is focused on the US. But I wonder if there's a way to get exposure to things like that in other parts of the world, as well.

Andrew Chanin: Right, and so you know we have a global focus as far as UFO is concerned. So foreign companies are something that certainly we're excited about entering the market. The Japanese billionaire that you mentioned was sent up to the ISS on a rocket made by the Russians, and this is something that US astronauts used to go to the space station on, as well. This is something that is a global story. The industry is extremely collaborative around the world, but there also are aspects where there is high levels of secrecy and competition, especially when it comes to defense and militaristic capabilities for space.

But seeing a Japanese billionaire with the dream of going to space be able to purchase a ticket and spend multiple days on the ISS, I think is something that's phenomenal. Earlier this year, we saw a Russian actress go to space to spend several days to film parts of a movie aboard the ISS. So it seems like this is really just early days for how people are looking to experience space, what they're looking to do once they're up there, and those different motives for being there in the first place. And this Japanese billionaire, as well, has other plans. He's hoping to go to the moon over the next few years, as well.

So for some people this is just a stepping stone, for others this is a once in a lifetime type of opportunity.

- Yeah, and we didn't even talk about Mars or asteroids. We'll have to have you back sometime soon. Andrew Chanin, co-founder and CEO of ProcureAM, good to see you.