Shares of Elon Musk’s SpaceX made a strong debut on Nasdaq on Friday, 12 June, listing at $150 apiece, an 11% premium to its issue price of $135. The listing marked Wall Street’s largest public offering and valued the rocket maker at roughly $1.96 trillion. Although the stock opened below Wall Street expectations, it soon gained momentum and climbed to $164, delivering a return of nearly 20% over the IPO price.
While the strong debut has heightened investor interest in the company, experts who spoke to CNBC cautioned against chasing newly listed stocks solely due to the hype of an IPO. They told the publication that newly public companies are often unprofitable in the early period and buying such individual stocks instead of investment funds can make that volatility more acute for unwary investors due to their concentrated positions.
Hence, if you are seeking exposure to with potentially lower risk, mutual funds and exchange-traded funds that hold the stock can offer an alternative by providing diversification alongside participation in the company’s growth.
How to get access to SpaceX via index funds?
Quick answers to key questions
How can I invest in SpaceX without buying its stock directly?⌵
You can invest in SpaceX indirectly through mutual funds or exchange-traded funds (ETFs) that hold SpaceX shares. These funds offer diversification and alleviate some risks associated with direct stock purchases.
What are the risks of investing in newly listed stocks like SpaceX?⌵
Newly listed stocks, including SpaceX, can be volatile and often unprofitable in the initial period. Investors are cautioned against chasing hype, as concentrated positions can amplify risks.
When can investors gain access to SpaceX via index funds?⌵
Investors may gain access to SpaceX through index funds within days or weeks after the IPO, depending on specific criteria set by index providers, typically within 15 trading days if it ranks among the top stocks by market capitalization.
What benefits do actively managed funds offer for investing in SpaceX?⌵
Actively managed funds can build positions in SpaceX before it’s included in index benchmarks, allowing for potentially quicker access and higher exposure compared to passive index funds.
Why is SpaceX’s IPO significant in the context of the stock market?⌵
SpaceX’s IPO is significant as it marks the largest public offering in Wall Street history, showcasing strong investor interest and setting a precedent for future mega-IPOs from companies like OpenAI and Anthropic.
Investment funds generally fall into two categories: actively managed funds and passively managed funds. Active funds rely on fund managers to select securities they believe will outperform the market, while passive funds replicate the performance of a specific benchmark index.
Passive funds, commonly known as index funds, track a market index and offer diversification at a lower cost. Historical data shows that, over the long term, such funds generally outperform those in which money managers actively pick stocks, the publication noted.
Many index fund investors will get access to SpaceX within days or weeks following the IPO, experts told CNBC. However, the timeline depends on the specific criteria established by various index providers. It ranges from a few days to more than a year.
Nasdaq adds a newly listed company to the Nasdaq 100 index as soon as 15 trading days after its IPO if it ranks among the index’s 40 largest stocks determined on the basis of market capitalisation, a criterion SpaceX is expected to meet. If a company does not qualify in this process, its entry into the index typically takes longer, often around three months.
Some of the index providers, including and FTSE Russell, relaxed their inclusion policies this year to “fast-track” the adoption of mega-IPOs into their respective indexes, the publication noted.
How to get access to SpaceX via active funds?
Those who missed out on thecan still get exposure to the SpaceX stock. Many actively managed mutual funds and exchange-traded funds already hold meaningful stakes in SpaceX
Unlike index funds, which typically add newly listed companies only after they are included in benchmark indices, active fund managers can build positions before or shortly after an IPO.
For example, eight active funds, including mutual funds, ETFs and closed-end funds, have held positions in SpaceX that exceeded 10% of their net asset value, CNBC reported, citing Morningstar data as of 1 June.
Those funds, from most to least exposure, are:
- The Baron Partners Fund
- Baron Asset Fund
- Baron Focused Growth Fund
- Baron Global Opportunity Fund
- The Private Shares Fund
- Baron Opportunity Fund
- ERShares Private-Public Crossover ETF
- Ark Venture Fund
SpaceX accounted for 37% of assets in the Baron Partners mutual fund, according to Morningstar. However, those holdings could get diluted if investors crowd into such offerings, the experts told the publication.
