SpaceX's market debut leaves Korean ETF managers scrambling after IPO allocation falls through

SpaceX made a splashy stock market debut, but South Korean asset managers' plans to include the shares in their ETFs quickly unraveled. Mirae Asset Securities, which had joined the domestic IPO underwriting syndicate, received no allocation in the final distribution, forcing fund managers to pivot to buying shares on the open market after the listing. The late entry came at a steep cost: SpaceX shares had already surged nearly 20 percent above the IPO price by the time the purchases were made, raising concerns about the drag on fund returns.

Space-related ETFs holding SpaceX shares fell sharply in early trading Monday, according to the financial investment industry. As of 10 a.m., KODEX US Space & Aerospace was down 9.36 percent and ACE US Space Tech Active had fallen 12.03 percent. TIME Global Space Tech & Defense Active also slipped 1.74 percent.

Returns diverged, however, depending on each fund's SpaceX weighting and investment strategy. TIGER Global AI Active gained 6.84 percent, TIME US Nasdaq 100 Active rose 4.29 percent, and TIME Global AI Active advanced 4.88 percent.

Market participants attribute the divergence in returns to differences in SpaceX weighting and the timing of each fund's purchases.

South Korean asset managers had originally planned to secure SpaceX IPO shares through Mirae Asset Securities and then add them to their ETFs. Those plans collapsed when Goldman Sachs, the lead underwriter, allocated no shares to the domestic syndicate in the final distribution.

Korea Investment Management was hit hardest. The firm had sought SpaceX IPO shares for its ACE US Space Tech Active ETF and its Korea Investment Global Space Technology & Defense Fund, but received nothing. It ultimately began buying shares on the open market on the first day of trading, revising its strategy on the fly.

"We confirmed that no shares were allocated from our IPO participation and responded by purchasing SpaceX in the open market for inclusion in the ETF," Korea Investment Management said. "We are deeply sorry to deliver the news of the zero allocation, given how high investor expectations were."

Mirae Asset Global Investments also revised its approach. The firm had considered adding SpaceX to its TIGER US Space Tech ETF on the listing day under the fast-entry regime for newly listed stocks, but ultimately decided against it, opting instead to include the shares two trading days after the listing as originally planned.

Timefolio Asset Management took a different route, buying SpaceX shares on the open market on the day of the listing.

Timefolio added SpaceX to three funds: TIME Global Space Tech & Defense Active ETF, TIME US Nasdaq 100 Active ETF, and TIME Global AI Active ETF. The firm said it chose the open-market strategy given the uncertainty surrounding IPO allocations.

"We managed the risk of portfolio composition data distortion from speculative allocation estimates while simultaneously building a SpaceX position in the market," said Kim Nam-ho, head of ETF management at Timefolio Asset Management.

A total of six domestic ETFs now hold SpaceX shares, according to ETF Check.

The fund with the highest SpaceX weighting is Korea Investment Management's ACE US Space Tech Active ETF, where SpaceX accounts for 26.16 percent of assets.

Samsung Asset Management's KODEX US Space & Aerospace ETF holds SpaceX at a 25.01 percent weighting. Both products have allocated more than a quarter of their assets to SpaceX.

Timefolio's TIME Global Space Tech & Defense Active ETF holds SpaceX at 3.51 percent, while Mirae Asset Global Investments' TIGER Global AI Active ETF has a 2.90 percent weighting. The TIME US Nasdaq 100 Active ETF and TIME Global AI Active ETF hold SpaceX at 1.01 percent and 0.68 percent, respectively.

The core problem is that most managers ended up buying SpaceX at market prices rather than the IPO price.

SpaceX closed its first day of trading on the Nasdaq on June 12 at $160.95, up 19.22 percent from its IPO price of $135, and reached as high as $176.52 during the session. Managers who failed to secure IPO shares had no choice but to buy in after the stock had already surged.

Industry participants say the key variables that will determine each ETF's future performance are SpaceX's weighting in the fund and the actual purchase price. Even funds holding the same stock can produce very different returns depending on when and at what price the shares were bought.

The fallout continues to ripple through the market. Deposits from domestic professional investors who had applied for IPO shares were fully refunded, and the Financial Supervisory Service has begun looking into the circumstances. Legal disputes are considered unlikely since the prospectus disclosed the possibility of a zero allocation, but the successive strategy reversals by fund managers inevitably caused confusion among investors.

Even amid the turmoil, asset managers are pressing ahead with their SpaceX marketing push. Kiwoom Investment Asset Management plans to list its KIWOOM US Space Data Center Infrastructure ETF on the Korea Exchange on Tuesday. The product is structured to hold SpaceX at up to a 25 percent weighting from the outset, investing in space launch vehicle companies and data center infrastructure firms.

Industry insiders caution that the flood of investor interest in SpaceX-linked ETFs could amplify short-term volatility. "Investor attention is concentrated on SpaceX's listing, but that does not translate directly into an immediate improvement in earnings across the broader space industry," an official at one asset management firm said. "Stocks where expectations are already priced in could actually see greater volatility."