Retail investors are rushing to trade in space ahead of SpaceX’s IPO, and one ETF is cashing in on the excitement.
Tema ETF’s Space Innovators ETF, which launched on March 30 and trades under the ticker symbol NASA, has amassed more than $1 billion in total assets in just 37 trading days, and by the end of last trading week had total assets of more than $2.6 billion.
This rapid rise is in part because retail investors are looking for exposure to SpaceX before it goes public.
While SpaceX has taken an unusual approach to its offer, setting up access to retail investors through brokerages at levels unusual for new deals typically dominated by institutional investors, the NASA fund would be another option for investors to gain access to Elon Musk’s rocket company. The company already directly owns SpaceX stock, which is privately traded. It is one of the few investment vehicles available to retail investors, with SpaceX currently accounting for about 7.5% of the fund.
“If you’re going to invest in space… you have to provide exposure to SpaceX,” Tema ETF founder and CEO Maurits Pott told CNBC’s “ETF Edge” on Wednesday.
Potts said there are no plans to sell any shares after the IPO takes place. “For us, an IPO simply declares a position relative to the market price,” he said.
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NASA 1M
NASA isn’t the only ETF with access to SpaceX, but the options are limited. Ron Baron, a billionaire mutual fund manager and longtime investor in Tesla and SpaceX, owns the rocket company through his First Principles Fund (RONB). Tesla is the leading holding in the RONB ETF at over 14%, while SpaceX holds nearly 2% of the fund’s assets. The ERShares Private Public Crossover ETF (XOVR), which provides access to late-stage private companies, also owns SpaceX stock, which the company says is worth nearly $300 million based on its more than $1.5 trillion IPO value.
Setting the exact valuation of the SpaceX deal remains a point of contention among the market and investors ahead of the deal’s pricing.
Mike Akins, founding partner at ETF Action, said on “ETF Edge” that the very structure of ETFs allows this kind of access to everyday investors. “Ten, 20 years ago, you were talking about space themes like this, and investors had to go out and look at all these companies. Now there’s a ticker,” Akins said.
Over the past few months, Todd Thorne, principal ETF strategist at Strategas, has invested in the Van Eck Space ETF (WARP), the Global X Space Tech ETF (ORBX), and the Round Hill Investments Space & Technology ETF (MA He noted that several new space ETFs have been launched, including RS), which in itself is a signal that retail investors are expected to pursue this theme, similar to other recent thematic trades around technological innovations from AI to quantum computing. “This is a very good read that shows that the industry expects space to be the next big thing,” Song told CNBC. “This is very similar to the way we thought about AI a few years ago and continues today.”
A total of six space-themed ETFs have debuted in the past three months. But Son cautioned that not all funds are created equal. “It all depends on how pure or diluted the ETF is, so due diligence on this is really important right now,” he said.
Other ETFs branded around space investing have been on the market for years, building portfolios of stocks that include purely risky space exploration companies, satellite companies, and broader aerospace and defense sector names.
Founded in 2019 and with more than $1.2 billion in assets, the Procure Space ETF (UFO) counts Rocket Lab, Firefly Aerospace, and Planet Labs among its top holdings. The SPDR S&P Kensho Final Frontiers ETF (ROKT), launched in 2018, also holds Intuitive Machines and Redwire.
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Five-year performance of the UFO ETF, which invests in space and aviation stocks.
The ARK Space and Defense Innovation ETF (ARKX) is a great example of a market-wide definition of key stocks, with Amazon and Deere also included in its portfolio.
Song said investors interested in these ETFs or the space investment theme should consider how much classic defense industry names overlap in their portfolios and how concentrated the funds are in a small number of high-risk stocks.
“There are only a limited number of publicly traded companies that are doing this,” Song said. Regarding the current group of space ETFs, he said, “Some may have 30 stocks, and some may have closer to 50 stocks.” “I have a feeling that once SpaceX goes public and continues to trade for a while, some of these funds will turn into more concentrated bets, depending on how they’re managed,” he said.
This is another factor for investors to consider. For example, NASA is an actively managed fund rather than tracking an existing stock index designed to represent a theme, approaches such as UFO, ORBX, and ROKT.
Investors will pay more for an actively managed approach from Space Stock Pickers. NASA’s annual net expense ratio is 0.87%, while ORBX’s expense ratio is 0.50% and ROKT’s expense ratio is 0.45%.
It is clear that Elon Musk will be the big winner of SpaceX’s IPO and become perhaps the world’s first trillionaire. But Eakins and Thorne said the biggest risk for retail investors getting into the space theme is volatility.
This week, the launch pad explosion of Blue Origin’s New Glenn rocket highlighted the risks in the space market.
“We expect volatility. That’s what usually happens in industries that are very early stage. Some companies will outperform, and some companies in the ETF will collapse because their business models don’t make sense,” Song said.
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