SpaceX IPO frenzy sparks overheating warnings as global ETF rush builds

Demand for SpaceX shares ahead of its initial public offering this month has surged, spreading overheating warnings across the global financial investment industry.

Three mutual funds and four exchange-traded funds holding SpaceX stakes have attracted a combined $14 billion (about 21 trillion won) in net inflows since the company's IPO plans became public in December last year, the Financial Times reported May 31.

The launch of related fund products has also been brisk. At least 14 new ETFs with SpaceX exposure are awaiting listing, the FT said.

Scottish Mortgage Investment Trust, a major British closed-end fund with 17.9 percent of its portfolio in SpaceX, has been trading at roughly a 7 percent premium to its net asset value in recent months — a reflection of investors piling in to gain indirect exposure to SpaceX shares before the listing.

Two other SpaceX-heavy funds, Edinburgh Worldwide and Baillie Gifford US Growth, have also shifted to premium trading this year. SpaceX accounts for 18.9 percent and 13.8 percent of their respective portfolios.

"Every type of market participant is scrambling to get SpaceX exposure," Jordan Stuart, a portfolio manager at Federated Hermes, told the FT. "Every day I get inquiries from investors wanting to buy funds that hold SpaceX — this kind of enthusiasm is unlike anything I've seen before."

Preparations are also underway for ETFs that link SpaceX shares to derivative instruments. GraniteShares, Leverage Shares and Direxion are among the prominent ETF providers that have filed with financial regulators to launch leveraged and inverse ETFs tracking SpaceX's share price.

Such products amplify SpaceX's price movements in pursuit of outsized returns, but that same leverage maximizes volatility and raises the risk of principal losses, making them products that require caution from investors.

SpaceX is currently the world's most valuable unlisted company, surpassing OpenAI and Anthropic, and is targeting a valuation of at least $1.8 trillion (2,700 trillion won) through its listing this month.

The FT noted that the frenzy has given rise to what the industry calls a "spaghetti cannon" phenomenon — a practice named after the saying about throwing spaghetti at a wall and keeping only what sticks. Fund managers are aggressively launching large numbers of SpaceX-themed ETFs at once, intending to keep only the ones that survive in the market. The trend has drawn repeated warnings that the SpaceX investment craze has entered overheating territory.

"All of this should be seen as a red flag for the market," said Barry Glavin, head of equities at Amundi, Europe's largest asset manager. "The argument that bold, unthinking investment wins is gaining ground — and while that approach may produce good results for now, we all know how it ultimately ends."

Christopher Barrett, global head of equities at French asset manager Carmignac, called the current situation "a speculative frenzy," adding that "investors are rushing in with money without any regard for fair value."

Shares in companies linked to SpaceX have also surged.

Redwire, a U.S.-listed maker of satellite and spacecraft components, has emerged as a favorite among domestic retail investors since news of the SpaceX listing broke. Filtronic of the United Kingdom and South Korea's Spear, both SpaceX suppliers, have each more than doubled in share price since the start of the year. EchoStar, a U.S. telecommunications company that sold a frequency band to SpaceX last year and received SpaceX shares in return, posted a share price gain of more than 500 percent in the same period.

"A company like SpaceX is, personally, a once-in-a-career type of case," said Lenos Chaviedes, head of equity capital markets at Neuberger Berman. "But I worry that the current market mood resembles the 2021-2022 period, when a historic listing boom was followed by a sharp downturn — and that the IPO frenzy now may be a powerful signal of a peak."

SpaceX was founded by Elon Musk in 2002 as a private space exploration and aerospace manufacturing company. Its core projects include reusable rockets, satellite internet and next-generation spacecraft.

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