It seems as if everyone’s talking about the upcoming SpaceX initial public offering — and this is for a few reasons.
First, Elon Musk is the company’s founder, and he’s known for aiming high when it comes to innovation — we’ve seen this at his other company, Tesla, where Musk is working to develop fully autonomous vehicles. Not everyone is a fan of Musk, but his ambitions generally intrigue a fair share of investors. Second, SpaceX includes three exciting tech businesses — rocket launches, satellite-based internet, and artificial intelligence (AI) — that appeal to investors seeking growth. Finally, there’s the excitement factor about something huge ahead: Reportedly aiming for a valuation of nearly $2 trillion, SpaceX may launch the biggest IPO ever.
So, the SpaceX operation, which is expected to happen this month, is big news. Still, participating in the IPO or buying shares right afterward may not be the best move for every investor. It’s important to remember that SpaceX, as a company heavily investing in growth and involved in certain unproven technologies, also includes a fair share of risk. But here’s the good news: There may be an easy, low-risk way of gaining exposure to SpaceX. And that’s through buying shares of exchange-traded funds (ETFs) that may invest in the technology and industrial giant.
Here are two to consider…
Image source: Getty Images.
1. Ark Space & Defense Innovation ETF
Ark Invest is already an investor in SpaceX through its Ark Venture fund, a fund that backs both private and public companies in highly innovative areas. So it wouldn’t be surprising to see the company add shares of SpaceX once they’re available to its Ark Space & Defense Innovation ETF (ARKX 2.66%).
This fund invests in a variety of companies involved in areas such as intelligent devices, reusable rockets, and advanced battery technologies. Its top holding is Rocket Lab, representing more than 8% of the fund, and it’s followed by chip designer Advanced Micro Devices, defense contractor L3Harris Technologies, and testing and robotics player Teradyne.
Considering Ark Invest’s support of SpaceX in the private market and the space fund’s focus, I wouldn’t be surprised if Ark Space & Defense was one of the first ETFs to buy SpaceX shares. Ark Space & Defense has climbed 175% over the past three years, largely outperforming the S&P 500.
Ark ETF Trust – Ark Space & Defense Innovation ETF
Today’s Change
(-2.66%) $-0.99
Current Price
$36.38
Key Data Points
Day’s Range
$36.06 – $36.83
52wk Range
$20.86 – $37.89
Volume
2.6K
2. The Procure Space ETF
Procure runs the Procure Space ETF (UFO 6.48%), a fund highly focused on what it calls “the space economy.” The fund launched in 2019 and lagged behind the S&P 500 when it came to performance in recent years — but since the middle of last year, it’s skyrocketed. This brings it to a gain of 250% over the past three years, compared to an 80% increase for the S&P 500.
Talk of a SpaceX IPO, which has been anticipated for a while, as well as interest in technology growth areas such as AI, may have boosted demand for this ETF as well as its underlying assets.
Like the Ark fund, Procure’s biggest position is in Rocket Lab, which has a weight of more than 6%, but the other top holdings are more closely focused on space than Ark Space & Defense’s leading positions. For example, the second-biggest holding in Procure is satellite imagery company Planet Labs and satellite broadband services company Viasat.
Considering this keen focus on space, Procure also might be one of the first ETFs to pick up shares of SpaceX.
ETFs and SpaceX
We don’t know for sure whether these ETFs will purchase SpaceX shares, of course, but it’s clear that the stock could be a good fit for them. So savvy investors may want to monitor these funds’ moves following the IPO, particularly if SpaceX shares slip at any point, offering the funds an opportunity to buy on the dip.
Why should you buy an ETF instead of SpaceX shares? ETFs reduce your risk by investing in a great number of stocks according to a specific theme — this means if one or a few of those stocks stumble, many others could compensate. Meanwhile, if one particular holding soars, the ETF and its investors will benefit.
That’s why investing in a space ETF could be your ticket to SpaceX exposure — with minimal risk.