In short order, SpaceX has become the fifth largest company in the world. And just three trading days into its life on the public markets, there’s been a massive influx of money into a new line of funds helping investors bet on short-term swings in the pricey stock.
Since SpaceX shares became available for trading on Friday, nearly a dozen exchange-traded funds have been launched that each promise to deliver either twice the daily returns of SpaceX or 200% of the inverse daily performance of the stock, before fees and expenses are factored in.
So if SpaceX’s stock is up 5%, as it closed Tuesday, the corresponding “long” 2x leveraged ETFs would be expected to rise about 10%. Those who have put money into an inverse 2x leveraged ETF, meanwhile, would expect to see a roughly 10% daily drop. Such high-risk, high-reward ETFs are usually seen as short-term bets.
So far, investors appear interested. On Monday, 11 leveraged ETFs benchmarked to SpaceX attracted more than $1 billion in volume. Even the lowest performing of those funds tracked by Bloomberg Intelligence had volume of $26 million, which analyst Eric Balchunas called “bonkers.”
If “you launch an ETF and it trades $1m on first day you are ecstatic,” Balchunas noted on X. “So far everyone eating … but we’ll see how this plays out.”
That momentum continued into Tuesday, as leveraged bets on SpaceX generated billions of dollars of additional trading volume in what Balchunas called a “total feeding frenzy.”
This level of interest would be unusual in most circumstances, but it tracks with SpaceX’s record-breaking IPO journey. The deal easily generated the most proceeds of any offering in history, and the shares are up for the third day in a row.
SpaceX options also launched on Tuesday, offering another way to play the stock. The demand has already been unprecedented, Reuters reported, citing Trade Alert data. More than half a million contracts changed hands in the first hour of trading, that story said.
Such demand — and likely volatility — makes leveraged ETFs an attractive tool, according to Tuttle Capital, which on Monday launched such a product. Tuttle also sold SpaceX the “SPCX” ticker ahead of its IPO.
“A newly public, high-volatility stock is exactly the kind of name where investors hold strong views but have had no clean way to act on them, and [the T-REX 2X Long SpaceX Daily Target ETF] is designed to let traders press a daily long view on SPCX with conviction,” CEO Matt Tuttle said in a statement.
Things aren’t expected to calm down for a while. Soon, passive and active funds benchmarked to popular indexes will likely need to start scooping up SpaceX shares. For now, 120 ETFs hold SpaceX shares, Balchunas wrote on X, and these are all actively managed funds making a conscious choice to own the stock.
The Center for Research in Securities Prices and FTSE Russell allow some IPOs into their indexes after just five trading days, while MSCI’s U.S. market indexes can admit new public firms after 10 trading days. Nasdaq has also approved rules for large IPOs that have paved the way for SpaceX to join the Nasdaq 100 as soon as early July.
Additionally, SpaceX has employed a complicated lock-up schedule that releases insider-owned shares slowly over the next several months. While that’s intended to prevent major volatility from a rush of shares hitting the market, it could still lead to some turbulence.
“There’s a huge amount of value sitting in the company that can’t sell,” GraniteShares CEO Will Rhind told MarketWatch last week. His firm has launched a pair of ETFs, “SPAL” and “SNK”, designed to help investors boost their exposure and hedge their bets on SpaceX, respectively.
Beyond the wave of new ETFs, there’s also a handful of older space-focused ETFs that offered pre-IPO exposure to SpaceX. Some have seen continued interest this week.
For example, the Tema Space Innovators ETF recorded $146 million in fund flows on Monday, according to FactSet. The fund has exploded in popularity since it launched in March, offering pre-IPO exposure to SpaceX. It has $3.2 billion in assets under management as of Tuesday, per FactSet.