Investors race to get exposure to SpaceX ahead of IPO

{"text":[[{"start":8.4,"text":"Investors are rushing to gain exposure to SpaceX in a “speculative frenzy” ahead of the rocket maker’s eagerly awaited flotation next month."}],[{"start":17.200000000000003,"text":"Since mid-December, when billionaire founder Elon Musk first confirmed rumours of what is set to be the largest initial public offering in history, a net $14bn has flowed into three mutual funds and four exchange traded funds holding slices of SpaceX, according to Morningstar data. "}],[{"start":35.400000000000006,"text":"A wave of new products is also set to be launched, with filings made for at least 14 ETFs offering exposure to the stock once it is listed."}],[{"start":44.95,"text":"Share prices of closed-end funds with an existing holding in the rocket maker — including the £16.8bn Scottish Mortgage Investment Trust — have started trading at premiums to their net asset values in recent months, as investors have rushed to buy."}],[{"start":60.150000000000006,"text":"“Everyone’s piling in,” said Jordan Stuart, investment director at Federated Hermes. “Investors every day are saying to me: ‘I want to own the funds that own these private companies’. We’ve never seen this before.”"}],[{"start":null,"text":"

"}],[{"start":73.25,"text":"Musk’s lossmaking company, whose activities span rockets, satellites and AI, filed for an IPO last week, laying out a vision that includes asteroid mining and “passenger transport to the Moon and Mars”."}],[{"start":86.4,"text":"Despite an unusual governance structure that gives Musk near-total control, investors have been hunting for ways to gain access to the company — already widely held by investment funds despite being private — hoping to profit from the AI boom and the lure of his business success. "}],[{"start":102.65,"text":"“The thing about Elon is: his investors don’t lose money,” one hedge fund executive said. "}],[{"start":108.35000000000001,"text":"Scottish Mortgage, which has 17.9 per cent of its portfolio in SpaceX as its biggest position, has traded at a sizeable discount to net assets in recent years, but began trading above NAV last month and is currently at about a 7 per cent premium. "}],[{"start":null,"text":""}],[{"start":125,"text":"Edinburgh Worldwide, with 18.9 per cent of its portfolio in SpaceX, and Baillie Gifford US Growth, which has 13.8 per cent, have also jumped to a premium this year."}],[{"start":137.75,"text":"ETF providers GraniteShares, Leverage Shares, Direxion and Defiance ETFs have filed to launch funds that will give leveraged or inverse exposure to SpaceX, while products from Tuttle Capital and YieldMax will try to generate income through options-based strategies tied to the rocket company’s shares, in return for limiting potential upside if the share price rises. "}],[{"start":159.6,"text":"An ETF using SpaceX stock derivatives from GraniteShares will make monthly payments to investors if the share price remains above a certain threshold, but investors could be on the hook for capital losses if the shares fall sharply. Harbor Capital Advisors has filed to launch SpaceXAI Lab ETF, which will invest in a portfolio of companies seen as likely to benefit from SpaceX’s growth. "}],[{"start":185.54999999999998,"text":"“The ETF spaghetti cannon is firing away as issuers aim to capitalise on SpaceX’s IPO,” said Ben Johnson, head of client solutions at Morningstar. "}],[{"start":195.24999999999997,"text":"“Their hope is that they can get a strand or two of pasta to stick and reap the rewards, irrespective of whether their funds wind up being long-term winners for investors,” he said."}],[{"start":205.49999999999997,"text":"Describing the launch of products before firms consider whether or not there would be demand for them, Johnson said providers were taking an approach of “ready, fire, aim”. He added: “Investors should be wary of such an incautious approach to product development.”"}],[{"start":null,"text":""}],[{"start":220.29999999999998,"text":"A handful of other space-themed ETFs have launched since February, with tickers such as MARS and WARP, joining the likes of JEDI and UFO. Filings for at least three more are pending."}],[{"start":231.99999999999997,"text":"However, some investors said the clamour to get exposure to this theme and the wave of launches should be taken as a warning signal."}],[{"start":240.64999999999998,"text":"“These sorts of things are all red flags,” said Barry Glavin, head of equities at Amundi, which manages €2.4tn in assets. "}],[{"start":251.34999999999997,"text":"“The more this speculative behaviour and the more these ‘no brainer, can’t lose’ propositions are bought into, it becomes very difficult for long-term investors,” he added. “They may do well for a while, but we all know how these stories typically end.”"}],[{"start":267.65,"text":"Kristofer Barrett, head of equities at Carmignac, pointed to a “speculative frenzy” where investors pile in “without caring about the price”. "}],[{"start":null,"text":""}],[{"start":276.84999999999997,"text":"Shares in a number of companies that are considered proxies for SpaceX have also soared as investors look for other ways to benefit in public markets."}],[{"start":286.29999999999995,"text":"US-listed Redwire, which makes satellite infrastructure and spacecraft components, has “emerged as the clearest favourite” among retail investors, according to retail investment data platform Vanda Research. Retail buying of Redwire shares was the highest on record in the week of SpaceX’s IPO announcement. "}],[{"start":306.65,"text":"London Aim-listed Filtronic and Korean component maker Sphere, both suppliers to SpaceX, are up more than 100 per cent this year. Telecoms company EchoStar, which sold some wireless spectrum to SpaceX last year in exchange for an equity stake, has jumped more than 500 per cent over the past year. "}],[{"start":null,"text":""}],[{"start":325.4,"text":"“It’s once in a career that companies like this come along,” said Renos Savvides, head of equity capital markets at Neuberger Berman. “It’s unlikely that you’re going to get another SpaceX.” "}],[{"start":336.84999999999997,"text":"But he added the flurry of IPO activity this year — with AI giants Anthropic and OpenAI also expected to list — could be a sign that the blistering stock market rally of recent years could finally be nearing its end. "}],[{"start":349.54999999999995,"text":"“It feels a bit like 2021,” he said, referring to that year’s boom in equity issuance which preceded a stock market slump in 2022. "}],[{"start":359.09999999999997,"text":"“I do fear that this is a sign of the top.” "}],[{"start":368.6499999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780040158_1691.mp3"}