VettaFi Head of Research Todd Rosenbluth appeared on Yahoo! Finance to discuss the implications of the highly anticipated SpaceX IPO on the ETF market.
Scheduled to go public on June 12, SpaceX continues to receive widespread attention. With an estimated valuation of over a trillion dollars, questions increasingly arise about the role SpaceX will play in portfolios across the ETF market.
Evaluating the Role of SpaceX in ETF Strategies
“The SpaceX IPO is impacting the ETF market more than anything I have seen in my 20-plus years in the industry,” said Rosenbluth.
The upcoming debut, widely regarded as the biggest IPO in history, is capturing investor attention at a scale rarely seen in recent history. “Its hard to find someone who is not looking forward to the SpaceX IPO whether because they are excited to be able to have it in their portfolio or they don’t want it in their portfolio,” Rosenbluth noted.
While the excitement around the listing is undeniable, index providers have mixed feelings about how SpaceX will fit into various index strategies.
Some providers have already announced that they will be incorporating SpaceX into their indexes. Popular funds, like the iShares Russell 1000 ETF (IWB) and the Invesco QQQ Trust (QQQ), which track broad large-cap indexes, such as the Russell 1000 and the NASDAQ 100, plan to add SpaceX to their holdings. Thematic indices such as the VettaFi Space index, which is the benchmark for the Procure Space ETF (UFO), will also soon have SpaceX in its underlying holdings. However, the stock will not be part of the S&P 500 this year.
Evaluating SpaceX Leveraged ETF Products
In anticipation of the upcoming launch, the ETF industry has been proactive, with numerous filings submitted for leveraged, single stock products tracking the company. Funds such as the T-Rex 2X Long SpaceX Daily Target ETF (SPAX) and the Defiance Daily Target 2X Long SpaceX ETF (SPCU), are already awaiting launch.
“A single stock leveraged ETF on a company that just became public and that is going to have some volatility is going to also be risky,” Rosenbluth noted. He continued, “Whereas broadly diversified ETFs like a space ETF or a broad market ETF, you’re going to get the benefits of diversification across other individual companies.”
Caution Around the Excitement
Rosenbluth also noted that while SpaceX will be an exciting offering for the ETF space, it likely will not be a huge weighting in most of the ETFs on the market. Concentrating heavy exposure around a single company exposes portfolios to volatility that can move the overall portfolio in an extreme way.
For more news, information, and analysis, visit VettaFi | ETF Trends.
VettaFi LLC (“VettaFi”) is the index provider for UFO , for which it receives an index licensing fee. However, UFO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of UFO.