SpaceX IPO: Investors Wary of Elon Musk's Ambitious Plans

The planned SpaceX IPO could raise as much as $US75 billion, valuing the company at up to $US1.8 trillion. This valuation has investors in Australia on high alert.

Gemma Dale, director of SMSF and investor behaviour at online stock-trading platform nabtrade, said investors are concerned about the potential impact on their ETFs. The IPO creates a situation where many clients who don't particularly want exposure to something like SpaceX will be acquiring it through their passive holdings,' she said. Investors can't opt out of investing in a certain company, so they'll be buying into SpaceX whether they like it or not.

The planned listing has indexes in the US mulling rule changes, including Nasdaq shortening the amount of time a share must trade before being included in its indexes from three months to 15 days. The requirement that at least 10 per cent of its share trades has also been dropped.

There are over 150 ETF products based on the Nasdaq Composite index and the S&P 500, including popular ones in Australia. These ETFs invest in all companies on those indices by default, meaning investors will be automatically investing in SpaceX when it enters the index.

Depending on the amount of SpaceX stock that floats, its entry into these indices and dramatic price fluctuations could affect the entire index. This has investors worried about the potential impact on their portfolios. They're concerned that SpaceX's wild price swings could cause their overall investment to be affected.

'I would caution against going all in on space stocks because many space business models will fail,' said Michael McCarthy, chief executive of Moomoo Securities. 'However, if they prove a viable business model, the potential upside is enormous.'

While CommBank has reportedly told customers they'll be able to invest directly in SpaceX IPO, nabtrade customers are more divided. Some investors will be eager to buy in, while others will be saying this is completely outside their risk profile,' said Gemma Dale.

The relationship between Musk's hype and reality takes the shape of an inverted pyramid, with the material base at the bottom (the real rocket accomplishments of SpaceX) but it opens up into a wider virtual realm,' according to author Ben Tarnoff. Tarnoff has co-written Muskism: A Guide for the Perplexed with historian Quinn Slobodian.

Using this 'financial fabulism', Musk projects himself as a public figure who makes science fiction-style promises that the global investor class finds credible enough to reward him with increased stock valuations.

It's this aspect of SpaceX that may be beyond the comfort zone of ETF investors. Space-related share transactions at Nabtrade amount to less than 1 per cent of total by number and size, and less than 1 per cent of active customers have exposure.

Among the more notable space ETFs is UFO, a passive space ETF. There's also MARS, Roundhill Space & Technology ETF, and NASA, Tema Space Innovators ETF. Cathie Wood's ARKX Space & Defence Innovation ETF invests in cutting-edge tech and aerospace.

'Even if Musk is over-promising and under-delivering, he has delivered some extraordinary things, and I'd like to be part of that,' said Gemma Dale. 'But there's another cohort who go, “this is completely outside my risk profile”.'

Investing directly in space stocks is akin to buying a gold explorer or perhaps a cryptocurrency,' said Michael McCarthy.

Key Facts

  • The SpaceX IPO could raise as much as $US75 billion.
  • The planned listing could distort the balance of investors' ETFs.
  • Over 150 ETF products are based on the Nasdaq Composite index and the S&P 500.
  • SpaceX's planned listing has indexes in the US mulling rule changes.
  • The company could enter the S&P 500 index as early as June.
  • SpaceX has reshaped the economics of orbital launch through the reusable Falcon 9 rocket.
  • The relationship between Musk's hype and reality takes the shape of an inverted pyramid.
  • Investing directly in space stocks is akin to buying a gold explorer or perhaps a cryptocurrency.

In the wake of the planned IPO, investors are divided on whether to take the plunge. Some see it as an opportunity to be part of a revolutionary space industry, while others are wary of the potential risks and uncertainty.

As the dust settles on the planned listing, one thing is clear: the investment community is on high alert, with investors watching closely to see how the IPO will pan out. The potential impact of the SpaceX IPO on Australia's investment landscape is yet to be determined, but it's an event that will be closely monitored by investors and analysts alike.

Investors Wary of Elon Musk's Ambitious Plans