Closing Bell - Manifest Space: Investing 101 from the Father of Space ETFs with ProcureAM CEO Andrew Chanin 4/24/25

Episode Date: April 24, 2025

April has been one of the stock market’s most tumultuous months ever. While defense and aerospace haven’t been entirely immune—as government spending on initiatives like space security rises, those boasting government contracts have proven to be safe havens for investors. Andrew Chanin, the co-founder & CEO of ProcureAM, is one of the minds behind the first-ever ETF fully dedicated to space stocks. He joins Morgan Brennan to discuss the investing landscape, the space economy, and where he sees opportunity in the volatility.

April has been one of the most volatile months in history for the stock market amid tariffs and trade-induced uncertainty. Aerospace and defense stocks have not been immune, but those boasting big backlogs of business have proven to be safe havens for investors, as government spending continues to grow for space initiatives, and not just in the U.S. So historically for space companies, government spending, defense spending, has been extremely helpful and has provided some kind of baseline revenues for a lot of space companies in your larger, more diversified aerospace and defense names.

But it's also really important to see that the commercial side of space is also expanding. So companies now have the ability to be able to be solely commercially fit focused, solely government focused, or a hybrid. And companies that are able to weather storms better, maybe those that are positioned to not just be reliant

on any one spending group. Andrew Chanin is the co-founder and CEO of Procure AM. The firm stood up the first ever exchange traded fund fully dedicated to space stocks back in 2019. Top holdings in the UFO Procure Space ETF include Rocket Lab, Intuitive Machines, Sirius XM and defense contractors like L3Harris and Lockheed Martin. The fund rebalances every quarter. On this episode, the father of space ETFs discusses the investing landscape, the space

economy and where he sees opportunity in all the tumult right now. I'm Morgan Brennan and this is Manifest Space. You look across the markets and you look at sectors like space and defense. What are you thinking right now? You know, there's been so much news, as you mentioned, that's come out, but you know, a big push has been kind of this, this modern new approach for space policy at the DoD level

and looking at how we're going to be further building out the US Space Force and Command. And so these are providing, you know, many new opportunities for public companies, private companies. It's kind of showing the hand of the US government as far as what direction we want to be moving for our space policy and how we want to protect our assets and those of our allies as well as domestic companies. And it's going to be really telling to see where this money gets spent in the days, months, and years ahead to better prepare us for this vision that we have as how the space and defense industries will be becoming

even more intertwined in the future. There's a lot of focus on trade policy that is changing and evolving on a daily basis. Are these companies that are immune to it or perhaps better positioned to weather some of these dynamics? How are you gaming this out looking across your investments in UFO and the portfolio? Historically for space companies, government spending, defense spending has been extremely helpful and has provided some kind of baseline revenues for a lot of space companies in your larger more diversified aerospace of defense names. But it's also really important to see that the commercial

side of space is also expanding. So companies now have the ability to be able to be a solely commercially fit focused, solely government focused, or a hybrid. And companies that are able to weather the storms better, maybe those that are positioned to not just be reliant on any one spending group. So now you pivot over to Europe and you see that they're starting to have issues of determining how they'll be able to work with companies like SpaceX and their Starlink communications in the future. And they're starting to say, what do we have that's local that we can use?

Now will it be a full replacement of US companies? It's difficult to say, but it seems unlikely given how advanced many US companies are with their various capabilities. But for launch, you can look at a company that used to be in the UFO fund No, no longer is eligible, but who knows when the next reconstitution comes about like Avio, which is a launch company You have talus the defense company. That's also partnered with Leonardo looking to do a JV with red wire and so you have companies that are looking to Partially partner with the US but it's going to be tough to say best companies start to move away from and governments start to become less likely to use Starlake or be completely relied upon Starlake. That's opening up other opportunities for European companies as well, like you tell sat and others that are providing communications capabilities. So relying on just one company may be a strategy

of the past and we're starting to see a lot more collaboration, especially while Europe looks to see if they can come up with any viable solutions to replace other US-based solutions. When we do talk about commercial space companies, I realize every company is, you know, its own situation, but are these names that have a lot of homegrown manufacturing and more US-based supply chains, at least when we're talking about American commercial space companies, or is it really hard to say? Yeah, you know, again, it's a mix based in a very collaborative industry Since since nascent beginnings with just ordinary launch And the more technologies evolve you have companies that want to use the best parts and pieces for whatever they're doing And so it can take a long time to come up with

your new new New pieces and parts when you have a project that usually spans new pieces and parts when you have a project that usually spans years and not just days and months. So finding new replacements is difficult. As far as looking at how defense spending may pivot things, we've seen that L3 Harris is looking to position themselves to be able to be a provider for Golden Dome, which is going to likely be a very large US defense project that's going to require many different providers and solutions. So consortiums are one way that we're seeing companies trying to work together as opposed

to trying to do things completely on their own. And that isn't a new strategy, but one that you're seeing alliances between the likes of SpaceX and Palantir and Aurel and others. Those companies working together and those types of alignments and arrangements may prove out to be the path forward for winning some of these very large contracts that are appealing for a lot of these aerospace and defense names. Yeah. As we earnings, quarterly earnings get underway for a lot of these big aerospace and defense names. Golden Dome is something that's coming up on conference calls because it's seen as the new homegrown homeland missile defense system vision that President Trump has put forward that experts expect is going to cost anywhere from tens to hundreds of billions of dollars to implement to develop implement and

operate over the coming years and coming decades so a huge potential Opportunity right now and one that will involve a number of space companies specifically, I guess look if you look out past some of this tariff and trade and policy noise I would imagine Golden Dome is one of those situations that you as an investor are pretty excited about. Are there other ones that folks should be paying attention to over a longer time horizon here? You're right.

This is probably a very large spend project that's also going to span years. Then once it's put into place, you need constant maintenance and operations and making sure that there's manned personnel that are making sure everything is working properly. But another area that hasn't gotten that much attention that I think is extremely important is building out the next generation space stations. China has its own solution already in operation. The ISS, we don't know what timeline it still has for remaining. I actually work with a private company that's trying to make proposals for keeping it up there longer.

And we've seen private companies that have really interesting solutions for things that could piece into different goals for the Iron Dome and whatnot. So we are seeing a lot of innovation out there from both small and large companies. And the tariff thing is important. There's no way of understating that it is absolutely going to be something that's going to change minds, change investment strategies, change partnerships and alliances. And to the extent that's going to change minds, change investment strategies, change partnerships and alliances. And to the extent that companies are able to figure out how to move around that appropriately could have a significant impact. But right now, obviously, we have Artemis, which is kind of a more immediate focus getting the return to the moon, building up a permanent

base on the moon. And as we look further, Mars is actually seemingly not that far away. And the idea that we could be sending rockets there before the end of this decade and possibly individuals to Mars not that far after is something that seems incredible, but will take a lot of work and a lot of spend and a lot of technologies being properly fleshed out so you know I think there are some kind of immediate things but really defense seems extremely critical and to the extent that low-earth orbit starts to get more clogged your launch is going to be extremely important trying to get up this this bottleneck of satellite launches for some of these larger constellations in many cases which need

hundreds to thousands of these satellites to be deployed within a year or so's time. Are these moonshots? A little bit of pun intended. Are these investable business models yet? Especially given how turbulent public markets are. We haven't necessarily seen it ripple to private markets, at least from what I'm hearing from some folks in the same sort of you

know dramatic way yet but are these investable possibilities now or are these still years out? You know a lot of these companies aren't completely reliant upon what the next project is. Some of them haven't won contracts for things that they're trying to apply for or win different types of grants. It is going to be difficult to tell who the absolute winners will be. It doesn't seem like this is a winner-take-all. This is still an industry that could have many different players specializing in incredibly advanced parts or different strategies of accomplishing the same goals. So I think having a lot of companies is actually a really important thing for the industry.

But I think another area that people might look at is instead of trying to pick individual winners something like an ETF that could provide their in sync global diversification to a lot of these space-related themes that we're seeing going on which is one of the reasons we created UFO in the first place and right now there's something like that if you don't know who the winner is going to be and I don't think anyone knows who the winner is going to be it's a way to play the broader space industry without having to put all your eggs in one two or three companies names and then you're having global

diversification depending on how trade wars and tariff wars end up advancing it gives you the ability to have exposure to some countries and other nations as well. So volatility shouldn't surprise anyone. We've seen plenty of it so far. They're going over the last year and I don't know when there's going to be an end of it, but for those that are maybe more sensitive to daily volatility, having a more diversified strategy might be something that they want to consider. So let's talk about it. Let's talk about UFO because there's a very specific methodology.

You were one of the first, if not the first to market with a space focused ETF. Um, and you have, you have a whole process for investing and how this, how this works. Yes. So the index that our fund tracks was developed, uh, contingency with Venafi S network and a former director of the space foundation, uh, Michael Walter range, and what they set out to do is try to find these companies that are actually revenue space. So UFO looks at having at least 80% of the underlying index at its rebalance period being focused on these pure play names,

so names deriving over 50% of the revenues from space-related businesses, activities, and services, but also recognizing that some of these more diversified aerospace and defense names that may not be pure play are also extremely critical to the industry. So companies that are these more diversified names, if they're generating over 20% of their revenues from space, but less than 50%,

or over $500 million worth of space revenues annually, they can be considered for inclusion as well. So what you end up with is a globally diversified basket of names that are rebalanced horribly, reconstituted semi-annually, and it's a way for people to play the global space theme, also getting a higher exposure to some of these more pure play space focused names.

And when do you reconstitute the ETF again? It will be coming up in June. So as some of these names, like some of these European names that used to be in the fund no longer qualified, they might be able to return to the fund. Or new names that have recently IPO'd that now meet the specifications for index methodology could also potentially make it into the fund in June.

Companies that are currently in the fund or index that no longer qualify at that reconstitution period could also be removed. So it's a constant living breathing index, but it is rules based. And those are some pretty hard rules that the index providers follow. Anything else you're watching here in the next couple of months or through the rest of the year? And I asked that, I know it's such an open ended question when there's so much to use the term everybody is using economic uncertainty. Um, but what else is keeping you occupied and taking up your brain trust right now? Yeah. Yeah.

I really want to see, um, you know, where space command is located. There's a, there's a lot of controversy there. Should it be Colorado? Should it be Alabama? Should it be Colorado? Should it be Alabama? Should it be somewhere else? I think that's going to help cement some more foundation for the Space Force moving forward. But really, I want to be monitoring the cadence of launch for some of these larger satellite constellations that are going out there. Because I'm really curious to see if these companies

are going to be able to hit their deadlines. Some of these companies are relying on spacecraft that haven't even been built yet as some of their launch providers. So will the launch companies be able to build out their launch vehicles safely and properly in time and will they hit their deadlines when they need to get half their satellites up within a designated time? And I think that's going to to let us know how different government agencies are viewing launch, low Earth orbit. Are we getting too crowded? Should there be more approvals, less approvals? And so I see a very immediate space race when it does come to the launch of these satellites. Andrew Shannon, up here. Thank you so much for joining

me. Appreciate the time. Thank you. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.