Space ETFs top US$3.3 billion in assets as funds trim holdings ahead of SpaceX's debut
SpaceX has yet to price a single share but institutional funds are already raising cash, trimming large-cap positions, and space ETFs gathered US$1.3bn in a single month.
In Canada, Harvest ETFs moved first.
The Toronto-based asset manager has filed what it says is the first publicly filed ETF prospectus in Canada offering exposure to SpaceX, registering the Harvest SpaceX Enhanced High Income Shares ETF (SPXE) with Canadian securities regulators.
According to the filing, SPXE will invest in SpaceX common stock on a levered basis through a modest leverage and active covered call strategy, targeting high monthly cash distributions alongside long-term capital appreciation.
Harvest expects the fund to begin trading on the Toronto Stock Exchange following SpaceX's IPO, subject to listing approval.
Harvest chief executive Michael Kovacs said the ETF pairs the firm's income strategy with exposure to SpaceX ahead of what he called one of the most anticipated public listings in market history.
The timing is deliberate.
SpaceX is targeting a valuation of around US$1.75tn for its listing, which Reuters reported could price as early as mid-June on the Nasdaq.
At that valuation, SpaceX would rank as the seventh-most valuable US company and represent the first trillion-dollar US market debut.
SpaceX's IPO filing, as Reuters reported, revealed the rocket maker is betting its future on a transition into an AI powerhouse.
The listing is already forcing large institutional investors to reposition.
Big mutual funds and passive index funds are raising cash and preparing to offload some large-cap holdings ahead of the IPO.
For passive funds, adding newly public companies to benchmarks could force them to sell down existing large-cap positions, John Flood, managing director of global banking and markets, FICC and equities at Goldman Sachs, wrote in a May 22 note to clients.
"Investors are increasingly focused on the impact of potential large IPOs in the pipeline," Flood said. Ahead of each of the four largest IPOs over the past few decades, he added, US equity mutual funds increased their cash balances.
He noted that IPOs fast-tracked into key indexes would carry small initial weights, with the impact growing as a company's float factor increases.
The Nasdaq 100 and S&P 500 are rolling out new rules to speed the admission of newly listed megacap companies to their benchmarks, according to Reuters, a change that would most likely apply to SpaceX.
AI leaders OpenAI and Anthropic are also seeking public market listings in the coming months and would likely qualify for fast-track index entry.
Reuters reported in October that OpenAI could seek a valuation of about US$1tn or more at listing, while Anthropic is in talks to close a funding round valuing it near US$1tn.
On Tuesday, Deutsche Bank analysts said demand for new listings has broad support, writing that "the capacity, as well as the willingness to invest into equities remains strong," backed by "huge household cash balances accumulated during the pandemic."
The SpaceX frenzy has already set off a wave of new product launches.
Space-related ETFs attracted US$1.3bn in new cash in the past month alone, lifting total assets under management in the segment to US$3.3bn, according to Morningstar Direct data cited by Reuters.
Six new pure-play space ETFs have launched in the past three months, joining the Procure Space ETF (UFO), which had been the only dedicated fund of its kind since 2019, the wire service reported.
The Tema Space Innovators ETF, which trades under the ticker NASA, gathered more assets in its first seven weeks than UFO has in seven years, with Reuters putting NASA's total at US$1.27bn.
Tema founder and chief executive Maurits Pot told CNBC's ETF Edge that NASA crossed US$1bn in 37 trading days and was on track to cross US$2bn.
Pot described the space economy's total addressable market at between US$20tn and US$28tn.
He also said that despite holding a 10-to-12-percent allocation to privately held SpaceX shares, the fund has kept a minimal premium to its net asset value, at times trading at a discount, and that the firm carries that SpaceX exposure at cost rather than marking it to market.
Pot said the IPO would simply re-mark that position to market price, with no obligation or intention to sell.
US space equities continued to rally on Wednesday as investors bet SpaceX's listing could force Wall Street to rethink how it values the sector, Reuters reported.
Intuitive Machines rose 8.5 percent, AST SpaceMobile jumped 4.8 percent and Planet Labs gained 1.8 percent. Over the past 12 months, Rocket Lab and AST SpaceMobile have surged 393 percent and 258 percent respectively.
"SpaceX going public has acted as a lens to focus the investment community on space travel and related support systems," said Peter Andersen, founder at Andersen Capital Management, in comments to Reuters.
Not everyone is enthusiastic.
Todd Sohn, ETF strategist at Strategas, cautioned that the space economy remains a small niche within the broader technology universe and warned that concentration risk is building.
A Reuters analysis of the seven existing pure-play space ETFs found all of them hold the same four stocks, including Rocket Lab, among their top 10 holdings, with a portfolio overlap of 50 percent or more across every fund.
"I start to worry when everybody is thinking the same way; it just makes it hard for any single manager or fund to differentiate themselves except through marketing," Sohn said.
