Hi Guys,
The SpaceX IPO is generating considerable interest with many members sounding keen to buy Elon Musk’s aerospace and satellite company focused on developing reusable rockets, satellite networks and space transportation technology.
- The SpaceX IPO would likely attract extremely strong demand, meaning Australian retail investors may have limited, to almost no, access to shares at the initial offer price.
SpaceX recently confirmed it will list on Nasdaq rather than the NYSE, widely seen as a direct response to the rule changes mentioned in the question above.
However, BetaShares’ (ASX: NDQ) ETF tracks the Nasdaq-100, meaning if SpaceX is added to the index, the ETF would be required to buy the stock as part of its passive index replication strategy. Under the updated rules, that inclusion could occur within roughly 15 trading days of an IPO, creating automatic buying demand shortly after listing.
Nasdaq’s rule changes have made it easier for newly listed mega-cap companies with limited free float to enter the Nasdaq-100, but there is an important catch: their initial index weight can be capped until more shares become freely tradable.
That’s an important point with regard to the SpaceX listing. If the company comes to market at a valuation north of US$1.5 trillion but with only a small float, its starting index weight may be artificially restrained. However, as lockups expire and more insider stock becomes available, its free float — and therefore its index weight — would rise over time.
This creates a different risk to a normal IPO inclusion. It is not just a one-off wave of passive buying when the stock enters the index. It could become a rolling source of demand as index funds are forced to increase exposure each time SpaceX’s eligible float expands.
The other side of that trade is displacement. Every additional dollar that passive funds allocate to SpaceX has to come from somewhere else in the Nasdaq-100. Given SpaceX’s potential scale, that could create some selling pressure across other index constituents, particularly mid-cap names with less institutional support.
The Pengana Private Equity Trust (ASX: PE1) has re-rated almost entirely on SpaceX excitement, with the rest of the portfolio offering little transparency. Investors are paying a premium to NAV for illiquid, marked-to-model assets, and post-IPO you face three headwinds — valuation compression if SpaceX disappoints, ongoing dilution from the phased insider lockup releases, and the drag of layered fees on indirect exposure.
The cleaner trade post-IPO is simply buying SpaceX directly or through NDQ. We feel PE1 as a pre-IPO proxy had merit early, but at current levels it looks like the upside is captured in the price.
