Caroline WoodsSpaceX isn’t public yet, but there are ways for everyday investors to own a piece of it. Joining me to discuss is Yuri Khodjamirian, CIO of ETFs. Yuri, thanks so much for being here.

Yuri KhodjamirianThank you for having me.

Caroline WoodsSo one of those ways is through your ETF, the Space Innovators ETF, ticker symbol NASA, NASA. You’ve said that a space ETF without space is like a semiconductor ETF without Nvidia. So so tell us, because space is still private for a few months, your ETF offers access through the private markets.

Yuri KhodjamirianAbsolutely. And yes, it does. It’s really important that when you’re constructing an ETF that gives exposure to the space economy, that you include the most important company in the space economy. And I think, people, as the company comes public through IPO, will start to realize how important this company has been, not just in terms of its size and valuation, but really about how it’s driven innovation within the space economy.

Yuri KhodjamirianI mean, it’s single handedly taken down launch costs into the thousands and, you know, declined by 90% and launched what is really the most ubiquitous, low-Earth orbit satellite constellation out there. SpaceX’s accounts for more than 50% of all space launches. And as you said, it’s impossible to imagine a space ETF without SpaceX in it. And it’s worth going through all of the effort required to get a private holding into an ETF.

Yuri KhodjamirianTo give investors access to it.

Caroline WoodsHelp us understand just how dominant is SpaceX right now and how much of the entire ecosystem depends on it?

Yuri KhodjamirianI think the dominance starts really from the technological barrier that SpaceX has pushed. You know, they have the first reusable booster. They are the company that has taken launch costs down by 90% since the times of the space shuttle. And the lower launch costs go. The more things it enables in space, the orbital economy, you know, we’re going to start to be able to put data centers up there to manufacture in space.

Yuri KhodjamirianAnd all of that is really made possible by the technological advancements that SpaceX has made. So it’s really single handedly that force that has pushed this forward. The second thing it’s done is made SpaceX a much more commercial enterprise, and it has been before. Historically, SpaceX has been really government focused and civil aerospace focused. But SpaceX has pushed the boundaries and made it commercial, not just in terms of the commercial availability of things like Starlink, but also the fact that they’ve really made it into a production economy.

Yuri KhodjamirianTry launch rockets, fail, try again, set up a constellation of satellites and sell in the thousands, which allows this kind of constant recycling and improvement. And that has been a massive innovation that governments around the world have now woken up to and are starting to take innovation from. The final days, of course, just its sheer dominance and market share, right?

Yuri KhodjamirianThe number of launches successful launches, the number of satellites on space. A lot of that is down to SpaceX. They have a very, very large market share in terms of the launch market. So it’s the most important and most dominant company in the space economy.

Caroline WoodsI one more question about SpaceX and then we’ll broaden it out. But I’m curious about if and when SpaceX actually IPO’s. What happens then. Do you think that’s the moment that this all kind of goes mainstream, or could it actually be when early investors start to take profits?

Yuri KhodjamirianIt’s going to be very interesting moment. I think this IPO is going to be unusual in many, many respects. Its retail participation index inclusion, and the fact that it’s going to be the largest IPO ever by some margin. And of course, the large valuations are being talked about for us. I think the most important thing, as advocates and investors in the space economy is just going to be more and more eyeballs on the space economy.

Yuri KhodjamirianI think for most investors, it was a part of the market you could ignore before. And now investors are going to have to start to look because space is going to be part of their benchmarks. It’s going to be very much in the minds eye as one of the largest public companies in the world. And so it is going to hopefully create this powerful dynamic where more and more investors are going to be looking at the space and analyzing space companies driving interest there, and also discernment between the good companies and the bad companies as well.

Caroline WoodsAs we think about the drivers that are making this an investable opportunity. Which one do you think investors are most underestimating? Right now?

Yuri KhodjamirianYeah, I think it’s often, as it happens with technological innovation. Costs come down and they start to hit the sort of inflection point where the declines start to open up new opportunities. We’ve seen the advent of low Earth orbit satellites, and really, it’s a huge innovation. A lot of people don’t know, but there are 2.5 billion, some estimates, 4 billion people in the world that have no internet coverage and space allows this to happen because they can beam internet from really to any point in the world.

Yuri KhodjamirianThe costs are so high, you know, $100 per month for some parts of the world, but for others, it’s actually competitive with, you know, landline and, and fiber. And so it creates broadband art. So it’s creating opportunities on Earth. And then as and I think those are underestimated in terms of what it’s unlocking just here on Earth.

Yuri KhodjamirianAnd as these costs continue to fall, we start to unlock more and more things in orbit. We can take up more material as a launch costs for, you know, dollars per kilo goes down and we can start to build things there. Manufacturing proteins in orbit is much, much more efficient. Manufacturing semiconductors is also a possibility. And you could start to think about data centers in space, which is Elon Musk‘s big push on innovation and the why.

Yuri KhodjamirianWhy does it make sense to put him up there? Well, the fact that the sun provides infinite energy and you can capture it up in space much more efficiently, and the fact that you can dissipate heat much more recently. So it makes sense that these things start to open up and create new opportunities. And I think investors are really missing that inflection point.

Yuri KhodjamirianWe’ve had 20 years of innovation, have pushed launch costs down, and we’re now entering that inflection points where it’s enabling more and more of new things to be put up in orbit and new opportunities for mankind and beyond.

Caroline WoodsOkay, so a lot of focus on Elon Musk and SpaceX, but you have a whole ETF of, SpaceX holdings, if you will. So talk to us about some of the other names and maybe some names that might surprise investors.

Yuri KhodjamirianAbsolutely. Look, I think I’d highlight sort of three key areas. The first is, the kind of sovereign competitive nature of space. SpaceX has been part of this, but I think investors and governments around the world have realized that they need to back local champions. You know, whether it’s Germany, Japan, France, Italy, all of them are investing vast sums of money to build their own launch platforms and to be able to send up their own satellites and things like that.

Yuri KhodjamirianAnd this globalization of space is creating, growth opportunities in international companies. So now third of the ETF is invested in some really interesting international businesses that are going to be the local champions. The reality is we can’t have SpaceX dominating the world for a long time. And we need to find alternative launch platforms, especially if you’re a government based buyer.

Yuri KhodjamirianAnd this is what’s happening. The second piece of the kind of the investment universe that we think is really interesting is the suppliers into the space economy. These are high quality businesses. They are very interesting and they’re often massively overlooked by investors. So here I’m talking about companies like tronic in the UK or Sphere in Korea. They’re providing various components that go into satellites and rockets.

Yuri KhodjamirianSphere builds, special alloys for space X, and so tronic provides a lot of the equipment for beaming some of the important data links between ground stations and, the satellites themselves. So we think these businesses are missed, as investors focus on some of the more well-known companies, you know, like the Rocket Labs and T-Mobile’s of the world.

Yuri KhodjamirianAnd so we think those are also interesting, but the real value is in finding those under the radar suppliers. And some of those international champions.

Caroline WoodsIf I already own defense or aerospace names in my portfolio, why do I need this ETF?

Yuri KhodjamirianThat’s a great question. I think the main argument against maybe some of the more legacy businesses is the point. I made about how the space economy has moved into this commercial gear and fence businesses previously served space in terms of serving governments and and also serving civil agencies like NASA. And these businesses, would have thousands of suppliers and then assemble these very complex, expensive pieces of equipment to send up into space of $600 million satellites.

Yuri KhodjamirianAnd we’re very much moved past that. We’re in the commercial stage, and you need a new set of suppliers and a new set of innovative companies. And so, in our view, these legacy businesses are ones that are maybe not as interesting. And are going to be slower growing, and the revenues from those business are going to be disrupted by the newer players, whether it’s Space-x or Rocket Lab or any of its kind of peers in terms of launch side or the newer low-Earth orbit satellites as well.

Yuri KhodjamirianSo we think that it’s a bifurcation in the space economy. There are fast growing businesses that you want to get exposure to. And then there are legacy aerospace and defense focused businesses where the growth is a lot slower than it was or than it is.

Caroline WoodsOkay, so bottom line for the everyday investor thinking about investing in space, what’s one key point or one key risk that they need to be aware of?

Yuri KhodjamirianWell, I think the most important point is to understand what the falling launch costs are going to enable. And how quickly these things will transform, thanks to the companies and what they pushed forward in terms of technological innovation. I mean, it’s not beyond the realms of possibility to start to think about launch costs going down to the level of like and what Musk talks about in the hundreds of dollars, which might allow point to point travel in Earth in 45 minutes.

Yuri KhodjamirianAnd this is an incredible piece of innovation, and that I think investors should be focused on. That’s going to help a lot of companies in the space economy, and a lot of them will kind of list all boats in that sense. I think in terms of risks. Look, as with all of these things, there, this is a risky endeavor.

Yuri KhodjamirianSpaceX historically is about you rockets blowing up and things failing. It’s a harsh environment out there. So you want to be looking for companies that are quality, that are able to weather the storm in terms of their financials, also have the best kind of technology and proven platforms. And that necessarily means that you want to be very selective in the types of companies that you pick.

Yuri KhodjamirianSo, for example, looking at some of the suppliers and an interesting way to play quality exposure in the space economy.

Caroline WoodsOkay. We’ll leave it there. Yuri Khodjamirian CIO of TEMA ETFs, thanks so much for shedding some light on the space. No pun intended. Really appreciate it.

Yuri KhodjamirianMy pleasure. Thank you very much.