Leveraged SpaceX ETFs Traded $1B in Volume on Opening Day

Soon, they might be calling it Space2X.

SpaceX’s initial public offering, the largest in history, has sent the ETF industry into a frenzy with  leveraged funds investing in the company trading over $1 billion in volume on opening day, according to a Bloomberg report. About a dozen leveraged funds hit exchanges last Monday, which could be one of the most active days for the category on record. Nearly all surpassed $100 million in AUM in their debut trading session. But are investors getting ahead of their skis? Some experts argue it’s better to wait until the stock is trading at “fair value,” while others say the short-term trading tools are worthwhile, but only for active investors who are aware of the risk. Still, most investors are acting cautiously, said Will Rhind, founder and CEO of GraniteShares.

“Since the beginning of [last] week, we’ve seen more interest in the short than the long from investors by a decent margin,” Rhind said. “What’s unique about SpaceX is the fact that it’s an IPO, it’s not a stock that’s been trading in the market for many years. The bulk of the demand that we’re seeing is most likely from people who are looking to hedge a position and can’t sell in the open market yet.”

Space or SpaceX?

There has been a difference in the performance and inflows between single-stock SpaceX funds, leveraged products from the likes of Direxion, Themes ETFs and others; and thematic funds that include SpaceX. The most that traders of Leverage Shares’ 2x Long SpaceX Daily ETF can lose is what they put in, said Paul Marino, the firm’s chief revenue officer. For most investors, “there’s no convenient way to bet against this stock or hedge it, and plenty of people will want to, whether they think the valuation is stretched or they’re just about to have SpaceX pushed into their index funds, whether they like it or not,” he said.

Other thematics that hold SpaceX have had similarly mixed results:

• The KraneShares Artificial Intelligence and Technology Public and Private ETF (AGIX) is up 28% so far this year but only invests around 3% in SpaceX.
• The Tema Space Innovators ETF (NASA) dropped over 9% on SpaceX’s first day of trading but is up 26% this year.

Space Fever: What’s important to remember is that the space industry, and companies linked to space, are highly speculative. Many space ETFs that have been around for years haven’t seen much success, according to Rhind.

“[Space] companies, for the most part, weren’t that much of an exciting story, and SpaceX was really the company that ignited interest in space,” Rhind said. “Some of the [space] ETFs have had a huge amount of inflows, not because the fundamentals have changed for any of the companies, but because SpaceX was coming to market, and there was hype around SpaceX being the catalyst for renewed interest in the space sector.”

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