What does SpaceX IPO mean for fund and MPS providers

Henry Cobbe CFA, Head of Research at Elston Consulting outlines whether and how index providers, fund managers and portfolio managers are preparing for the the SpaceX IPO

What Does the SpaceX IPO Mean for Fund and MPS Providers?

SpaceX is Elon Musk’s rockets, satellite and AI conglomerate with a vision of further space exploration and AI development.

How much is being offered

The company is doing an Initial Public Offering of 555.6 million shares at a price of $135 each, which would raise approximately $75 billion, representing just 3% or so of total shares, thereby valuing the business at approximately $1.8 trillion.

Can retail investors participate?

Yes, retail investors can participate in this IPO (the deadline for UK investors is 10th June 2026) and can also participate in the “secondary market” (as they can with any share) the moment the share starts trading on an exchange.  Investors can do this via a self-directed trading platform.  (Individual investors operating their own accounts are known as “retail investors”.)

Should retail investors participate?

That’s an individual choice.  Confident self-directed investors who enjoy and know how to do individual company research can make dramatic gains or losses by investing in individual shares.  They are doing the same work as professional investment managers who often have access to more sources of information and the ability to act on that information more quickly.  So one risk to retail investors is so-called “information asymmetry.”

Behavioural hazards

Other risks for retail investors are behavioural.  Investors can be their own worst enemy by giving into behavioural biases which lead them to chase winners too late, sell losers too early, and attempt to time the market.  These actions can prove value destructive as evidenced by repeated Dalbar studies refreshed annually.  According to the latest report, cited in Forbes magazine, the average US retail investor portfolio has delivered +9.8%pa, lagging the S&P500 index +13.0%pa return over the past 10 years.

Will financial advisers recommend SpaceX directly

Typically no.  Most financial advisers do not recommend whether to buy or sell individual company shares or other individual securities.  Most financial advisers use portfolios of funds which deliberately aim to diversify away individual security-specific risk by using funds for each asset class.  Advisers aim to capture the returns of a mix of asset classes for a recommended level of risk-return that the adviser assesses as suitable for the client’s needs and objectives.

Will MPS investment managers invest in SpaceX directly

Typically no.  Investment Managers who provide Managed Portfolio Services (MPS) for financial advisers also do not recommend whether to buy or sell individual company shares or other individual securities.  MPS providers manage portfolios of funds which deliberately aim to diversify away individual security -specific risk.  Managers aim to capture the returns of a mix of asset classes for a recommended level of risk-return that an adviser assesses as suitable for the client’s needs and objectives.

Will active equity funds invest in SpaceX directly

Potentially yes.  If active fund managers like the prospectus, they may participate in the IPO, or participate in the secondary market.  As fund is a form of institution that is buying the shares, they are known as “institutional investors.”

Will index-tracking equity funds invest in SpaceX directly?

Index funds aim to track a particular index.  So whether or not an index fund will own SpaceX depends on the index inclusion rules as overseen by an index committee.  Some index providers have amended their rules to include the upcoming “mega-cap” space and AI IPOs.  Some argue that the rule-change was opportunistic and gets round the protections those rules are meant to create.

• The NASDAQ 100 Index revised its rules to include the SpaceX “mega-cap” listing just 15 days after listing, compared to 30 days under the previous version of the index rules.  This means that NASDAQ-index tracking funds and ETFs will have to acquire shares in SpaceX 15 days after listing. 
• The MSCI World Index revised its rules to include the SpaceX “mega-cap” listing just 10 days after listing.  This means that world equity index tracking funds and ETFs will have to acquire shares in Space X 10 days after listing.  The company is expected to have a 0.08% weight in the index.  Similarly, active funds benchmarked to NASDAQ will have to consider whether to acquire SpaceX rather than taking an active benchmark risk.
• The S&P 500 Index did not revise its rules.  Its rules only allow companies to be included in the index which meet three primary criteria: 1) profitability: companies must be generating positive net income for four consecutive quarters; 2) time: newly listed companies must trade for a minimum of 12 months before being eligible for inclusion; 3) freefloat: the company must meet necessary freefloat (publicly traded investable shares) to ensure there is a sufficient volume of shares to be traded.  SpaceX does not meet any of these criteria so will not be included in this key index tracked by billions of index-tracking dollars.

Will thematic equity funds invest in SpaceX directly?

Both active and index-tracking thematic equity funds may well include SpaceX shares in their allocations.  Thematic funds focused on space exploration and/or artificial intelligence intelligence would include SpaceX shares subject to manager decisions (active funds) or index inclusion criteria (index-tracking funds).

Summary

SpaceX and subsequent "mega-cap" IPOs are drawing attention to the equity market.  We do not consider them appropriate for a first-time direct equity investor.  Investment managers and financial advisers typically look to diversify away company-specific risk, not concentrate on it.

We explore this further in a separate article: Should I buy SpaceX IPO?