NASA’s SpaceX ‘makes history again’: Space Capital

Chad Anderson, Managing Partner of Space Capital, joins Yahoo Finance’s Alexis Christoforous to discuss the latest SpaceX launch, the SPAC boom, and Ark Investment’s position cut in Virgin Galactic.

Video transcript

ALEXIS CHRISTOFOROUS: Welcome back. A pretty incredible day for space exploration. SpaceX launched four astronauts into orbit this morning from NASA's Kennedy Space Center in Florida, using a recycled rocket and capsule for the very first time. Joining us now to talk about that and opportunities for investors in the final frontier is Chad Anderson, managing partner of Space Capital. Chad, thanks for being with us. So put this in perspective. How significant is today's rocket launch for space exploration?

CHAD ANDERSON: SpaceX makes history again. We find ourselves saying that on a pretty regular basis these days. This is a third crewed mission for NASA. They've launched 10 people in the last 11 months. And like you mentioned, this is the first time that they're doing-- launching humans with a flight-proven rocket and spacecraft. So Dragon launches four people comfortably. So with 11 people in space now, I think they're going to be pretty cozy on station.

For me, and looking-- taking a step back, the big-- the question still remains, is, can incumbents keep up with the pace of innovation? The inspiration for a crew, the all civilian mission is launching this September. That'll be SpaceX's fourth crewed mission to orbit. And Boeing, who was meant to be the safe bet here, is hoping to launch their test flight of an uncrewed mission in September. So, really, SpaceX pulling away and coming out way out in front on this one.

ALEXIS CHRISTOFOROUS: You know, another one that seems to be falling behind is Richard Branson's Virgin Galactic. I know that Cathie Wood's new Ark ETF concentrating on space and exploration actually just divested themselves of Virgin Galactic. What's your take there?

CHAD ANDERSON: Well, their elusive launch date is perpetually in the future. And I think that the public markets are starting to see that and realize that. Meanwhile, Blue Origin's new Shepard vehicle, their test program is accelerating. And it looks like they're planning to launch people on their next flight. So there's competition coming. And that market for suborbital space tourism is still unproven. So there's a lot of question marks there.

ALEXIS CHRISTOFOROUS: I want to get back to the Cathie Wood's new space exploration ETF because there are companies in there you wouldn't think should be in there, like John Deere and Netflix. What do you think about that?

CHAD ANDERSON: Yeah, I mean, we're very excited about their ETF and appreciate their approach to investing in this category. You know, it includes a couple of infrastructure companies that you'd expect to see, the people associated with rockets and satellites. But their largest holding is Trimble, which is a distribution company that brought us the first commercial GPS receivers in 1984. So, like you mentioned, there are some holdings in here that have some outsiders scratching their heads and struggling to see the space connection.

But their investments align very well with our thesis at Space Capital, which recognizes that space-based technologies are the invisible backbone of our economy. And so, GPS, geospatial intelligence satellite communications, these all play a critical role in most major industries, from agriculture to insurance, logistics, retail, marketing, finance, you name it. And so, actually, our favorite pick on the Ark ETF list is [INAUDIBLE] Company. Tractors have been utilizing space technology to drive autonomously for decades now. And the ag tech sector has been an early adopter of Earth observation, geospatial intelligence data to deliver the precision agriculture services. So, as we like to say, in the same way that every company today is a technology company, every company of tomorrow will be a space company.

ALEXIS CHRISTOFOROUS: I also just want to correct myself here. ARK's Cathie Woods actually didn't divest completely of the Virgin Galactic holding, but they did significantly cut their holdings in Virgin Galactic. I believe they're now the smallest within that ETF. I want to talk about the role SPACs have played in sort of bringing space exploration to the average investor. Do you think that that's going to last? What kind of impact has it had?

CHAD ANDERSON: I think it's here to stay, even in light of the new regulation. But it's a bit of buyer beware. So our data shows that investors liquidated $7 billion in 15 space company exits in Q1. There's more on the way. There's eight space company SPACs that have been announced. All of these really vary in terms of quality and risk. And most are highly speculative from a public markets perspective. They're all pre-IPO, and some are even pre-revenue. But there's a few that have significant milestones and some strong fundamentals to support their lofty valuations.

But this bodes well for private market investors who have, until this point, had to watch the growth of this category from the sidelines. This is providing some more options to invest. And so, really, it's while we're seeing this as a great source of capital for some of these infrastructure companies, in particular, we're cautious that some of these valuations and growth targets might be out of reach for companies that don't have a defensive data angle, which explains our thesis and how we're thinking about this category, which aligns very nicely with the ARK ETF.

ALEXIS CHRISTOFOROUS: Well, definitely an exciting time for space and exciting time for investors willing to play in that area. Chad Anderson, managing partner of Space Capital, thank you.