For years, if you wanted to get a piece of SpaceX, you basically needed to know someone. And it helped if that someone was named Elon Musk. Now that the company has finally had its initial public offering — the biggest ever — investors can finally get in on the action.
Or not. While some people see a once-in-a-generation company headed straight to the moon and remember how Musk’s Tesla minted millionaires, others fear his rockets are going to implode their beloved portfolios.
Reality will probably be less dramatic, but that doesn’t make it any less confusing. There are a lot of ways to invest in SpaceX beyond owning the stock, and most of them involve exchange-traded funds. To guide you through the options, Bloomberg Money interviewed Bloomberg Intelligence’s Eric Balchunas, who leads a global team of analysts covering the 10,000 ETFs that now exist worldwide.
So whether you’re excited, nervous or just curious about the biggest IPO in history, here are a few ways investors can use ETFs to diversify their portfolios or put their convictions to work.
Let’s say you’re not a fan — of Musk, SpaceX, or maybe just new public companies in general. What’s an investor to do?
There are millions of buy-and-hold investors for whom investing actually means “VOO and chill” — internet shorthand for buying a vanilla S&P 500 fund such as Vanguard’s VOO and tuning out the noise. That strategy has worked so fabulously well that there’s some $13 trillion tracking the index now. The S&P index committee recently decided to exclude SpaceX until at least June 2027, and so S&P 500 investors can basically watch the SpaceX launch party from afar and deal with everything later.
The company will need to become consistently profitable before the committee — which is a pretty secretive, some might even say infamous, group — collectively decides the stock is ready for inclusion. Even then, they may decide to take issue with the company’s governance, seeing how Musk owns 80% of the shares and is practically an immovable object atop its management structure.
What if an investor wants a little more than none?
If they want, they can buy the stock or another diversified ETF to gain a little exposure. Some of the other major indexes decided to fast-track SpaceX’s inclusion; those include the Russell 1000, the Bloomberg 500 and the Nasdaq 100. But it’ll be just a small part of those indexes to start, with the largest being the Nasdaq 100 at around 0.75%. The popular Invesco QQQ Trust Series 1 fund (ticker QQQ) tracks the Nasdaq 100 — which, it’s worth mentioning, has significantly outperformed the S&P 500 over the last decade. The “Qs,” as it’s called, will be an appealing option for fans of growth stocks who are probably happy with SpaceX’s speedy inclusion.
These are all big, broad index funds. What’s your advice for someone with a fierce conviction about SpaceX?
For investors who want to either double down or short SpaceX, there are more than 20 SpaceX-related ETFs vying to get listed that will allow for all kinds of strategies. The most noteworthy will be single-stock ETFs that provide either 2x or -2x leverage; there are already 11 of them in the US alone that started trading today. They're not hard to spot. Their names usually contain words like “Leveraged” or “Inverse” and advertise the multiple. Issuers ProShares, Direxion, GraniteShares, Defiance, T-Rex and LeverageShares are all in the mix.
Using an inverse fund to capitalize on poor post-IPO performance, say, or to hedge a broader portfolio can be easy and effective. But the fine print is really important here: The leverage resets daily, so volatility can corrode the returns. At Bloomberg Intelligence, we developed a “traffic light system” to categorize ETFs — and leverage always earns a red light. Leveraged ETFs are really for professional traders more than retail investors, which means they must be monitored closely and are best used only over short-term timeframes.
Those are clearly for bold views. What are some other ways to invest in the space economy?
For anyone excited by outer space and the rapidly growing space economy, which some analysts say will triple over the next decade from its current value of roughly $600 billion, there are about 10 space-themed ETFs already on the market, with more on the way. All of them try to capture not only what SpaceX is doing but also the rest of a vast industry. Assets in this category have, in one year, surged from $1.5 billion to about $6 billion.
Investors should think of thematic ETFs as riskier complements to an otherwise basic core portfolio — almost like we use hot sauce in small doses on food. Thematic ETFs tend to be more volatile, more unpredictable and more expensive than broader indexes like the S&P 500, so less is often more.
The juggernaut of the category is the Tema Space Innovators ETF (ticker NASA). Since launch just a few weeks ago, it has usurped the competition and reached $2.6 billion in assets — a rare feat for any ETF that’s taking on established incumbents. The ETF drew so much attention and assets because it was the first space ETF to add SpaceX ahead of its IPO via a range of special purpose vehicles (SPVs). The ETF will convert these into SpaceX shares at the current market price, which could give a little extra pop to the performance.
Outside of that, it has 37 other stocks in the portfolio, mostly from the aerospace, telecom and satellite industries — so it’s not like you’re buying only Musk here. While this is among the most expensive space-themed ETFs at 0.87%, it’s within the normal range of thematic funds, which tend to cost more than ETFs used in the core of a portfolio.
The next biggest by assets — and with an equally memorable ticker — is the Procure Space ETF (UFO), which came out seven years ago. UFO owns the same top five stocks as NASA but is more of a pure space play, with more tech and fewer communication holdings overall. It plans to add SpaceX only a few days after the IPO.
Then there’s ARK Space & Defense ETF (ARKX), which is the only other space-themed ETF with more than $1 billion in assets. Actively managed by Cathie Wood, ARKX is very concentrated with only 43 stocks in the portfolio. There are also space ETFs that focus more on space technology, like Global X Space Tech ETF (ORBX), or satellites and communication, like Corgi Space & Satellite Communications ETF (DIPR), which is also actively managed and the cheapest at 0.35%.
By the way, how do companies typically fare after they go public?
Not well, at least historically. In the first year, almost all of them go down. However, the last 18 months have seen some better results. The average IPO over that timeframe has shown positive returns in the first month, three months and six months. Tesla — Musk’s last company to IPO — went up 65% in its first 12 months. A lot of investors learned not to bet against Musk in the ensuing years, but SpaceX dwarfs that quaint version of Tesla, which was worth only about $2 billion when it started trading.