NASA ETF’s two-month, $2.6 billion liftoff

Retail investors are flocking to space investment trading ahead of SpaceX’s IPO, and an ETF has cashed in on the excitement.

Theme ETFs’ Space Innovators ETF launched on March 30 and trades under the ticker symbol NASAIt surpassed $1 billion in just 37 trading days, and assets rose to over $2.6 billion by the end of last trading week.

This rapid rise is due in part to retail investors seeking to scout SpaceX before it goes public.

While SpaceX has taken an unconventional approach to its offerings by providing an unusual level of access to retail investors through brokers in new deals that are often dominated by institutions, the NASA funding creates another alternative for investors to gain access to Elon Musk’s rocket company. It directly holds SpaceX shares, which are already privately traded. It’s one of the few investment vehicles available to retail investors, with SpaceX currently representing about 7.5% of the fund.

“If we’re going to invest in space… we have to offer access to SpaceX,” Tema ETF founder and CEO Maurits Pot said on CNBC’s “ETF Edge” on Wednesday.

Pot said he has no plans to sell shares after the IPO takes place. “For us, an IPO is just a statement of position relative to the market price,” he said.

NASA isn’t the only ETF with access to SpaceX, although options are limited. Hedge fund manager and billionaire Ron Baron, a longtime Tesla and SpaceX investor, owns the rocket company through his First Princes fund (RONB). Tesla is the largest holding in the RONB ETF, with over 14%, while SpaceX holds about 2% of the fund’s assets. ERShares Private-Public Transition ETF (XOVR), which offers access to late-stage private companies, also owns shares of SpaceX, which it says is worth close to $300 million based on its expected IPO valuation of more than $1.5 trillion.

Determining an exact valuation for the SpaceX deal remains a matter of debate in the market and among investors ahead of the deal’s pricing.

Mike Akins, co-founder of ETF Action, said on “ETF Edge” that the ETF structure itself is what makes this kind of access possible for everyday investors. “Ten, twenty years ago you talked about a space theme like this; an investor would have to go out and research all these companies. Now there’s a sign,” Akins said.

Todd Sohn, chief ETF strategist at Strategas, noted that many new space ETFs have launched in the past few months, including the Van Eck Space ETF (warp), Global X Space Tech ETF (ORBX) and Roundhill Investments’ Space and Technology ETF (ANTHEMThis is a sign that retail investors are expected to follow the theme, as they have with other recent thematic trades highlighting technological innovations from artificial intelligence to quantum computing. “That’s a pretty good read, to me, indicating that the industry expects the next big development to be space,” Sohn told CNBC. “This is a very similar idea to the idea of ​​artificial intelligence from a few years ago and still ongoing.”

A total of six space-themed ETFs were launched in the last three months. But Sohn cautioned that not all funds are created equal. “It all depends on how pure or diluted the ETF is. So due diligence on that is really important right now,” he said.

There are other ETFs that have been around for years, branded under the theme of space investing, creating stock portfolios that include pure play, high-risk space exploration companies, satellite companies and broader aerospace and defense sector names.

Procure Space ETF (UFOwhich started operating in 2019 and has assets of over $1.2 billion), Rocket Lab, Firefly AviationAnd Planet Labs is among its largest holdings. SPDR S&P Kensho Final Frontiers ETF (ROKT(launched in 2018) is also Intuitive Machines And redwire.

ARK Aerospace and Defense Innovation ETF (ARKX) With its portfolio including Amazon and Deere, it’s a good example of how a defining group of top stocks can vary widely across the market.

Sohn says investors interested in these ETFs and the space investment theme should consider how much overlap in a portfolio with more classic defense industry names, as well as how concentrated the fund is in a small group of high-risk stocks.

“There are so many publicly traded companies doing this,” Sohn said. “Some may have 30 holdings, some may have closer to 50 holdings,” he said of existing space ETFs. “Once SpaceX goes public and trades for a while, you’ll see some of these funds transition into more concentrated bets, depending on how they’re managed,” he said.

This is another factor investors should consider: It is an actively managed fund rather than tracking an existing stock index designed to represent the theme, which is the approach of NASA, UFO, ORBX, ROKT and others, for example.

Investors will pay more for the actively managed approach of a stock picker in the space: NASA’s annual net expense ratio is 0.87%, ORBX’s fee is 0.50%, and ROKT’s expense ratio is 0.45%.

It’s clear that Elon Musk will be a big winner from SpaceX’s IPO and likely the world’s first trillionaire. But both Akins and Sohn said the biggest risk for retail investors entering the space theme is volatility.

Risks in the space market became even more evident this week with the explosion of Blue Origin’s New Glenn rocket on the launch pad.

“We expect volatility. That’s what usually happens in very early-stage industries. There will be companies that outperform, and companies in ETFs will break up because the business model doesn’t make sense,” Sohn said.

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