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  • Fund Watch
  • disruptive innovation

Could ARK Invest head to the stars with its Space Exploration ETF?

The revelation that ARK invest is planning to launch a Space Exploration ETF [ARKX] has seen the shares of companies in the sector skyrocket.

The news broke on 13 January, after Catherine Wood, CEO of the firm, filed a prospectus to launch an actively managed ETF with the Securities and Exchange Commission.

The firm intends to invest at least 80% of the ETF’s assets in domestic and foreign equities involved in space exploration and innovation. This includes aerospace companies that launch, make, service and operate satellites or vehicles; suborbital aerospace companies working with drones, air taxis and electric aviation vehicles; and enabling technology companies.

With many investors looking to tap into the space investment theme, the planned launch of the fund has been a boost for space-related stocks.

Space tourism firm Virgin Galactic’s [SPCE] share price shot up 99.6% on the news, from $23.21 on 4 January to $46.35 on 27 January. Meanwhile, shares in Stable Road Acquisition [SRAC], which merged with space transportation company Momentus in October last year, rose 16.2%, from $17.29 on 4 January to $20.10 on 27 January.

These and other stocks hoping to drive further expansion in the space theme, be it through developing new spacecraft, orbiting telescopes, launch systems or broadband satellites, will likely form the ETF’s holdings. They could include companies such as Maxar Technologies [MAXR], Northrop Grumman [NOC], Globalstar [GSAT], Lockheed Martin [LMT] and SpaceX — when it decides to go public

 

Looking beyond the stars

With so much excitement in the extra-terrestrial space, it looks like the sector could be set to take off.

According to a report by Research and Markets, the global small satellite market is projected to grow from $2.8bn in 2020 to $7.1bn by 2025. Space tourism, on the other hand, is expected to reach $1.7bn by 2027, ReportLinker indicated.

Bank of America [BAC] projects the space industry’s revenue will explode 230% from circa $424bn in 2019 to circa $1.4trn in 2030.

 

230%

Space industry's forecast growth

 

“While the COVID-19 pandemic has led to delays in some public and private programs the outbreak has not appeared detrimental to overall investment,” Ron Epstein, an analyst at the bank, wrote in a note to clients seen by CNBC. “This may largely be due to the fact that most spending in space is business-to-business/government which generally recovers faster than business-to-consumer spending.”

ARK Invest is already known for its pioneering spirit in new and thriving sectors, having successfully introduced several successful ETFs focused on the technologies of the future.

The ARK Innovation ETF [ARKK], which has holdings in stocks such as electric vehicle leader Tesla [TSLA], has seen its shares climb from a low of $33 on 18 March 2019 to $138.34 on 27 January this year. Meanwhile, the ARK Next Generation Internet ETF [ARKW], which has holdings in Spotify Technologies [SPOT], has raced from a low of $40.49 on 18 March last year to $158.57 on 27 January 2021.

This gives some commentators confidence that ARK’s journey into space will also deliver sky high returns.

“This strong performance means that investors are now whipping out their chequebooks to snap up shares in space companies that could find their way into the new space exploration ETF. Wood clearly has her fingers on the technology pulse,” Bevis Yeo wrote in Stockhead.

 

"Wood clearly has her fingers on the technology pulse" - Bevis Yeo

 

“Space exploration and infrastructure projects are expected to be a booming revenue play for savvy investors in the coming years,” Kirsteen Mackay wrote in Value The Markets. “This move by ARK invest reinforces this belief with clout and it’s likely to prove very popular with investors nervous about investing in individual space stocks, which are prone to high volatility.”

 

A budding investment space

The Space Exploration ETF will not be the only space-related fund on the market, with the Procure Space ETF [UFO] already pushing out into the final frontier since its launch in April 2019. Shares in the fund have climbed 9.6% so far in 2021 (through 27 January’s close).

Another rival is the SPDR Kensho Final Frontiers ETF [ROKT], which is focused on US index-based companies engaged in either space or deep-sea exploration. Its share price has grown just 2.5% in the last year, from $37.70 on 27 January 2019 to $38.65 on 27 January 2021.

While space ventures have seen a general uptick in interest, ARK’s involvement could boost projected sector growth and innovation within companies.

Disclaimer Past performance is not a reliable indicator of future results.

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