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The Biggest IPO Ever Meets Passive Investing · Trillions

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
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Speaker 2: Welcome to Trains. I'm Joel Webber and I'm Eric Balchunas
0:23
Speaker 2: you know what's happening. Eric, This massive ipo is about
0:29
Speaker 2: to drop SpaceX. We now know the ticker which.
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Speaker 3: Is SPCX, which, by the way, the whole story. There
0:36
Speaker 3: as a whole story there which was bought. I guess
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Speaker 3: Elon Musk rang up Matt Tuttle and said, hey, you
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Speaker 3: have this.
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Speaker 2: I think it was probably one of Musk's minions, but.
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Speaker 3: Yeah, probably, although I could just imagine Tuttle's the smile
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Speaker 3: on his face when he got that call. Because they
0:52
Speaker 3: have to buy the ticker, and from what we learned
0:54
Speaker 3: about the people who bought Meta from Round Hill, it's
0:56
Speaker 3: probably a good amount of money. And he was holding
0:59
Speaker 3: it because it was a spack etf and it was
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Speaker 3: like left for dead, like you know, spack one. They
1:03
Speaker 3: didn't been out of vogue for like three years, and
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Speaker 3: he just held onto it for the outside chance and
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Speaker 3: he won.
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Speaker 2: He was a pay day. Yeah, So a lot of
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Speaker 2: speaking of pay days, a lot of people are eyeing
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Speaker 2: this SpaceX ipo as a potential pay day. One of
1:18
Speaker 2: the things about SpaceX. That's really noteworthy obviously, is it's
1:20
Speaker 2: been around for twenty plus years already. It's a mature business.
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Speaker 2: It's going to come to market and dwarf almost every
1:28
Speaker 2: other company that's out there. There's only a few that
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Speaker 2: are larger, probably right, And we're talking like potentially a
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Speaker 2: two trillion dollar valuation, and there's a lot of complexities
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Speaker 2: that IPO of that size brings.
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Speaker 3: Yeah, and we have been all over this. This is
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Speaker 3: getting a lot of readership. People are interested in this topic.
1:45
Speaker 3: It reminds me of when Lebron went right to the
1:48
Speaker 3: NBA from high school. You know, only a couple players
1:51
Speaker 3: have done that. Kobe did it too. It's just very rare.
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Speaker 3: This is a monster event. And what's interesting to us,
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Speaker 3: and we'll talk about it, is that the end is
2:00
Speaker 3: all have to decide how soon they let it in.
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Speaker 3: And they're basically in the process of changing the rules
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Speaker 3: just for this Onestock and or other megacap IPOs.
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Speaker 2: Because there's some other IPOs, big big IPOs coming in
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Speaker 2: the form of possibly open AI and anthropical lad in
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Speaker 2: the year.
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Speaker 3: And that really brings up all questions about what's proper,
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Speaker 3: what are the rules for if they can be changed.
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Speaker 3: How do they differ? Like if you own a Russell
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Speaker 3: and you have like quote beta with Russell, but S
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Speaker 3: and p's different, Like depending on who owned SpaceX when
2:31
Speaker 3: that return could be wildly different different. Now then you've
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Speaker 3: got some of the niche ETFs that are going to
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Speaker 3: own SpaceX, some already have SpaceX in terms of like
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Speaker 3: shares before the IPO. So there's like, I don't know
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Speaker 3: seven or eight like subplots here that we're going to
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Speaker 3: try to unpack as best we can and make it
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Speaker 3: simple for everybody.
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Speaker 2: So joining us in this episode we have two colleagues
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Speaker 2: from Bloomberg Intelligence, James Seaffert, who's a senior ETF analyst,
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Speaker 2: and Sharoon Francis, first time on the show and the
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Speaker 2: research associate, this time on Trillions, SpaceX and the Dawn
3:04
Speaker 2: of the Megacap IPO. James, Sharon focoing to Trillions.
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Speaker 4: Thanks for having me back, happy to be here.
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Speaker 5: Thank you, Nice to be on.
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Speaker 2: Okay, James, why don't you set this up? First of all,
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Speaker 2: we're talking megacap, we're talking to trillion. There's some details
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Speaker 2: that we still don't know at the time of the recording,
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Speaker 2: like exactly when the IPO is going to happen, but
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Speaker 2: we do we have seen the s one that brought
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Speaker 2: some new things to light. What did we learn from
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Speaker 2: that that we didn't know before?
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Speaker 4: I mean, the one thing we learned is we got
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Speaker 4: an insight into the unlocked schedule of the shares. Typically,
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Speaker 4: when you IPO, there's like a quiet period where no
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Speaker 4: shares of the insiders can be sold at the initial
3:43
Speaker 4: launch and only the shares from the IPO can be sold.
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Speaker 4: So we know that that SPACIC is targeting around to
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Speaker 4: seventy five billion dollar equity IPO, but we also know
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Speaker 4: they're going to unlock shares pretty early for a certain
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Speaker 4: subset of the holders. And there's all these targets and
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Speaker 4: dates that they're going to hit by and they're going
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Speaker 4: to unlock a huge chunk of this, you know, subset
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Speaker 4: of the shares, which we think is fifty percent potentially
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Speaker 4: up to eighty percent of the total Shared SpaceX will
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Speaker 4: be unleashed by day one hundred eighty or like six
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Speaker 4: months after the IPO whenever that happens. The remaining is
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Speaker 4: like core inside holders like Musk himself and other people,
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Speaker 4: They can't sell anything until a full year after the IPO.
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Speaker 2: So what does this mean for a retail investor who
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Speaker 2: has mostly been on the outside looking in, unless you
4:26
Speaker 2: were savvy enough to maybe make some ETF and mutual
4:29
Speaker 2: fund investments in the past couple of years.
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Speaker 4: Yeah, I mean, from my perspective, the one thing to
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Speaker 4: note is, like you mentioned, it's we're looking at a
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Speaker 4: potential two trillion dollar valuation for the stock. But what
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Speaker 4: you have to come back to is like this thing
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Speaker 4: is ipoing with just seventy five billion. So well, I say,
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Speaker 4: just seventy five billion is still a massive company, but
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Speaker 4: it's it's a very small portion. We're talking low single
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Speaker 4: digit percentage points of the total valuation of what SpaceX
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Speaker 4: potentially could be. So there's a lot of questions, as
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Speaker 4: Eric kind of hinted at at the intro here, like one,
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Speaker 4: this is a massive stock, you need to get it
5:00
Speaker 4: in the index. But two, it's such a small portion,
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Speaker 4: like it doesn't meet the requirements. A lot of these
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Speaker 4: industries have requirements for you know, ten percent afloat certain
5:08
Speaker 4: amount of voting shares and all of these things that
5:10
Speaker 4: these industries.
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Speaker 2: Divisibility used to be one, yeah.
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Speaker 4: And exactly, and there's all these things that you have
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Speaker 4: to go in that you have to meet to meet
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Speaker 4: these requirements, and they're like, we're gonna wave it all
5:19
Speaker 4: like and there's obviously there's both two sides at the
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Speaker 4: coin here, and I can argue both sides of why
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Speaker 4: it makes sense they should be doing some level of
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Speaker 4: this and why maybe it's going a little too far.
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Speaker 2: Well, keep arguing with yourself. That's always entertaining, Like what
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Speaker 2: are the things that you know you think there's investor
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Speaker 2: confusion or angst about.
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Speaker 4: Yeah, I mean one of the things is like people
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Speaker 4: are like these passive index funds and passive investors are
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Speaker 4: going to be forced to buy this thing at a
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Speaker 4: high valuation and they're the exit liquidity for you know,
5:46
Speaker 4: VC and anyone who has these private shares, which kind
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Speaker 4: of makes sense. But at the same time, and the
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Speaker 4: other part of it is like why would you change
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Speaker 4: like multi decade long rules of like usually there's a
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Speaker 4: one year period. Most of these industries had a twelve
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Speaker 4: month what they call seasoning period from IPO before they
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Speaker 4: could even be considered to add to the indices. And
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Speaker 4: this is like we're going to do away with that.
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Speaker 4: SMP is going to move it to six months. Russell
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Speaker 4: is officially going to move it to a five days,
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Speaker 4: NASDAK is going to move it to fifteen days. So
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Speaker 4: these are like really massive changes. But part of it
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Speaker 4: is like these aren't you know, fifty million dollar market
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Speaker 4: cap ETP. I mean companies coming to market here this,
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Speaker 4: like you said, this is a massive stock that's going
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Speaker 4: to come into the index. If you're an index fund,
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Speaker 4: you just want to own the market, Like this is
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Speaker 4: a huge part of the market to just sit out
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Speaker 4: on and not own for twelve full months. So there's
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Speaker 4: got to be some give and take here for why.
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Speaker 4: That's obviously why these industries are considering doing these fast
6:37
Speaker 4: ads for these things that meet these requirements to be
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Speaker 4: a megacap IPO, and there's different requirements for each of
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Speaker 4: them on what they consider to be megacap. But the
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Speaker 4: three companies as you mentioned that would fit this criteria
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Speaker 4: that are likely expected to IPO in the next year
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Speaker 4: or so, SpaceX, open Ai, Andthropic would likely all qualify
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Speaker 4: under these criteria, assuming they listen on NASDAK.
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Speaker 3: Let's go through the indexes. So there's three big eaes
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Speaker 3: S and P five hundred, Russell one thousand and NASDAQ
7:01
Speaker 3: one hundred. NASDAK will buy it fifteen days after the
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Speaker 3: IPO Russell five days. SMP hasn't decided yet, but if
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Speaker 3: it does decide to fast track, it's six months. So
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Speaker 3: as these shares become unlocked, it is seeming like passive
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Speaker 3: at least Russell and NASDAK will buy some of the
7:19
Speaker 3: shares that are dumped, which should help the price stabilize.
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Speaker 3: But then you've got this like five and a half
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Speaker 3: months that go by before the big daddy SMP five hundred,
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Speaker 3: which has like what is it, like twenty trillion benchmark
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Speaker 3: to it and or tracking it with index funds. What
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Speaker 3: percent of the shares that are being sold out there
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Speaker 3: could be absorbed by passive at the end of six
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Speaker 3: months if the S and P fast tracks.
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Speaker 4: Yeah, so if it fast tracks, the numbers that we
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Speaker 4: came up with were like, it's like, it's so we
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Speaker 4: have at least twenty billion that's going to be bought
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Speaker 4: by passive funds alone. The question is like, it's not
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Speaker 4: what we don't exactly know because there's some performance metric
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Speaker 4: that would unlock shares kind of early, so we don't
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Speaker 4: know exactly how that's going to play. Out. But I
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Speaker 4: mean we're talking, like I said, seventy five billion dollars
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Speaker 4: is expected to be in that IPO, and just the
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Speaker 4: passive funds alone were expecting to buy up nineteen to
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Speaker 4: twenty billion dollars worth of this thing.
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Speaker 2: So that's it.
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Speaker 4: And that's not even including the active products, which like,
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Speaker 4: if they don't buy this, they're technically underweight SpaceX. Right,
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Speaker 4: so we're looking at past if they're definitive for spiers.
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Speaker 4: But you're if you're a manager managing to the S
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Speaker 4: and P five hundred, not buying this is an active decision.
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Speaker 4: If this thing goes off and you don't hold it,
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Speaker 4: that's not a good look.
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Speaker 3: Yeah, this is Joel. This is so fascinating because let's
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Speaker 3: say you bought the Russell one thousand because you just
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Speaker 3: like that brand. It's men you that's pass it.
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Speaker 2: One thousand part. Yeah, a lot of.
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Speaker 3: People buy SMP, but let's just say you did. Now
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Speaker 3: you own SpaceX early. SMP's going to wait six months.
8:46
Speaker 3: Then active managers have to decide what to do. Some
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Speaker 3: may not buy it, some may buy it, some may
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Speaker 3: buy it with overweight. There's all kinds of things that
8:55
Speaker 3: are going to happen here, But James does seem like
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Speaker 3: Active typically once they at least most of what the
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Speaker 3: index does. That way, they're like tracking it to a degree.
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Speaker 3: So if Active buys it and the S ANDP buys
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Speaker 3: it after six months, seven months, half of that seventy
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Speaker 3: five billion will be absorbed by quote funds Active and
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Speaker 3: Passive simply because that's how big time the S and
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Speaker 3: P five hundred is. That leaves only half of the
9:19
Speaker 3: shares out there that wouldn't have a buyer. And I
9:22
Speaker 3: guess then it comes down to how well it performs
9:24
Speaker 3: what the other metrics are. So it seems like this
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Speaker 3: is a very coddled IPO, Like there's a lot of
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Speaker 3: force buying coming up. There's a lot of lock ups,
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Speaker 3: Like it just seems like it's got like a lot
9:35
Speaker 3: of garbage, almost like those things in Bowling the bumpers. Yeah,
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Speaker 3: just seems like a lot of bumpers are going on.
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Speaker 3: So it doesn't like completely wreck the market.
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Speaker 2: But it also feels, you know, it also feels like,
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Speaker 2: you know, the forced buying part for a company that's
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Speaker 2: like this unprofitable also raises a lot of paranoia and
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Speaker 2: concerns with investors like James like, what do you do?
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Speaker 2: Say you just don't like this idea, but do you
9:57
Speaker 2: like the s and P five hundred? Do you like
9:58
Speaker 2: the cues? What do you do? Yeah?
10:00
Speaker 4: I mean you don't have a choice. It's gonna buy it,
10:02
Speaker 4: I mean, but the thing is you got to realize
10:03
Speaker 4: also specifically for the Russell and the SMP, their float,
10:08
Speaker 4: they're weighted by the float, right, So that's seventy five
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Speaker 4: billion is how it's gonna get weighted in the index.
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Speaker 4: It's not like it's coming in. It's going to be
10:14
Speaker 4: weighted at the two trillion dollar valuation. Which is why
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Speaker 4: I refer to those early unlocked schedule as a kind
10:20
Speaker 4: of release valve. Like at a time, if the market
10:22
Speaker 4: starts going crazy, some of those people who had their
10:24
Speaker 4: shares release, they might have been planning to hold it,
10:26
Speaker 4: but if it's going up a lot, they might just
10:28
Speaker 4: you know, be willing to sell, and vice versa. If
10:30
Speaker 4: the stock performs poorly, those insiders that had their shares
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Speaker 4: unlocked are like, well, I'm not going to sell now
10:35
Speaker 4: it's going down. But again, like Eric said, it kind
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Speaker 4: of feels like very coddled because again, the early lock
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Speaker 4: up ends at one hundred and eighty days and SMP,
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Speaker 4: which is the largest buyer, whether it's passive or active.
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Speaker 4: They're the ones that are going to be buying the
10:47
Speaker 4: most in a dollar amount necessarily weight of the product.
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Speaker 4: They're not going to consider adding this to the index
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Speaker 4: until six months.
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Speaker 2: How long until we see a q X SpaceX.
11:00
Speaker 4: I mean issuers are launching everything nowadays. I'll let Erric
11:02
Speaker 4: comment on it, but I wouldn't be surprised if they
11:04
Speaker 4: decided to. Somebody does that.
11:19
Speaker 3: I think you will see that. There was a couple
11:21
Speaker 3: of attempts at SMP five hundred x tech like they
11:23
Speaker 3: would cut a sector out, but they didn't take off.
11:26
Speaker 3: I think what might work is you're gonna have two
11:29
Speaker 3: x SpaceX and then inverse SpaceX. So an inverse SpaceX
11:33
Speaker 3: would be a way to buy a hedge if you
11:35
Speaker 3: are that nervous. So there's a way to use ETFs
11:38
Speaker 3: to like sculpt the outcome you want. So it's there's
11:42
Speaker 3: a solution out there for people. I think. I will
11:45
Speaker 3: say Tesla went up I think sixty percent in the
11:48
Speaker 3: first year, but it was much smaller when an iPod
11:51
Speaker 3: and that's really the that's.
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Speaker 2: And was not included in those indexes.
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Speaker 3: I know it took like I mean, I guess ten
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Speaker 3: years before it gott into the SMP. This is again,
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Speaker 3: just such an unusual situation. It's a shame because I
12:03
Speaker 3: think these companies should IPO earlier when they're small, and
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Speaker 3: then they would go up through the system like everybody else,
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Speaker 3: and it would just work itself out and people who
12:11
Speaker 3: own small caps will get a little taste, then the
12:12
Speaker 3: midcaps will get a taste. It's just not like that anymore.
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Speaker 3: And this is sort of like the New World and
12:18
Speaker 3: everybody's having to deal with it and passive investors. Look,
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Speaker 3: I think I polled Twitter. I said, do you own
12:23
Speaker 3: the S and P and do you think early entries
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Speaker 3: a good idea? Seventy five percent of people own the
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Speaker 3: S and P. Of those people, two thirds said do
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Speaker 3: not add it early. So only a third wanted early
12:34
Speaker 3: according to my poll, which is very interesting. But the
12:38
Speaker 3: people who are the.
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Speaker 2: Very unscientific poll for what it's worth.
12:41
Speaker 3: But I think the ETF fishers who have these ETFs
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Speaker 3: that track the S and P, they might be the
12:46
Speaker 3: ones putting pressure because the wholesalers are probably hearing from
12:49
Speaker 3: their clients we want SpaceX so they could be like
12:51
Speaker 3: the people who want it are like bigger voices. It's
12:55
Speaker 3: just so fascinating, Sharun.
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Speaker 2: We've gone through some index inclusions that complex cities that
13:00
Speaker 2: all this brings up Already, there's a handful of ETFs
13:04
Speaker 2: and mutual funds that have exposure to SpaceX. Talk us
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Speaker 2: through whose stands to benefit here? Right?
13:12
Speaker 5: Absolutely, so, I'd say when it comes to you know,
13:16
Speaker 5: the mutual funds and the ETFs that are holding this,
13:18
Speaker 5: it's really kind of a two horse rate. You look
13:20
Speaker 5: at Baron and you look at Fidelity. Really those are
13:23
Speaker 5: the biggest mutual fund in ETF firms that are owning
13:26
Speaker 5: the their owning SpaceX, and there's also a few upstarde
13:30
Speaker 5: ETFs including XOVR, NASA, AJX, arccx AX. Well, the beneficiarys
13:37
Speaker 5: are just all those firms they were able to get
13:40
Speaker 5: in early, particularly if you look at some of the
13:44
Speaker 5: the valuations we're able to drive from holdings data some
13:48
Speaker 5: of them since they they've held this in their portfolios,
13:50
Speaker 5: it's gone up from four hundred percent to even one
13:53
Speaker 5: thousand percent.
13:55
Speaker 2: Yeah.
13:56
Speaker 3: Sure, let me let me jump in here, because we
13:59
Speaker 3: wanted to a note on this. This is months ago
14:02
Speaker 3: because we foresaw this. You can't get this data. It
14:04
Speaker 3: just doesn't exist because SpaceX isn't a ticker and someone
14:09
Speaker 3: owned through SPV, which isn't even like used as a
14:11
Speaker 3: private ticker. It's very complicated.
14:13
Speaker 2: Special purpose vehicle.
14:14
Speaker 3: Yes, yeah, Sharun had to dive through the data and
14:17
Speaker 3: just real quick. The Fidelity contrafund, which is famous, owns
14:20
Speaker 3: eight billion of SpaceX.
14:22
Speaker 2: You haven't been able to get in famously also for
14:24
Speaker 2: a while.
14:25
Speaker 3: That's a lot of SpaceX. But there has been outflows
14:28
Speaker 3: from that fund, outflows from the Baron Fund. In other words,
14:30
Speaker 3: the mutual funds that own SpaceX have benefited the most,
14:33
Speaker 3: but there's outflows. That's how like messed up that structure is.
14:37
Speaker 3: It's kind of a shame really because you got the
14:40
Speaker 3: right holdings wrong structure. The ETFs that hold it, oh
14:43
Speaker 3: my god. You put a little in there and they
14:45
Speaker 3: come quickly like fish. But Sharun, how did you get
14:49
Speaker 3: this data? How do you know Fidelity owns five percent?
14:52
Speaker 3: And then how do you know how they valued SpaceX
14:55
Speaker 3: in the portfolio because it isn't like something has an
14:59
Speaker 3: actual so Fidelity has to value it on what they think.
15:03
Speaker 3: And he actually got all of this somehow, How did
15:05
Speaker 3: you do it?
15:06
Speaker 5: So? I guess for the longest time, musual funds and
15:09
Speaker 5: what they hold have been a black box for us,
15:11
Speaker 5: But it really just happened naturally. We're poking around holdings
15:14
Speaker 5: data and Bloomberg. We source holdings data from a variety
15:18
Speaker 5: of different sources. You can some they'll provide us to
15:20
Speaker 5: us directly, some you can scrape from a website. Some
15:23
Speaker 5: it's just in a mandatory filing that that these issuers
15:26
Speaker 5: have to file quarterly. So in those in those holdings files,
15:29
Speaker 5: we generally will get the number of shares and we'll
15:32
Speaker 5: also get a reported market value. So with that we
15:35
Speaker 5: can kind of back into a price you could say,
15:38
Speaker 5: I mean, it's not necessarily a price. You could really
15:41
Speaker 5: more or less call it a mark. And obviously those
15:44
Speaker 5: are super discretionary in terms of like how each fund
15:48
Speaker 5: company wants to value a private company, so there's a
15:51
Speaker 5: lot of discretion there, but at the very least you
15:54
Speaker 5: can gather directionally, you know how where a company sits,
16:00
Speaker 5: whether it's appreciating, and specifically with SpaceX in particularly, you
16:04
Speaker 5: could even see the pop in this estimated valuation or
16:08
Speaker 5: mark rather during the XII excrew decision. So it's really
16:12
Speaker 5: it's not to be confused with a straight price, but
16:16
Speaker 5: it is a mark.
16:18
Speaker 2: Like a direction proxy. You could say, yeah, okay, all right,
16:23
Speaker 2: So knowing all that, and knowing that we've got this
16:27
Speaker 2: IPO event coming up, what does it mean for the funds,
16:32
Speaker 2: mutual funds and ETFs that hold these shares going into
16:36
Speaker 2: an IPO like this? Are they exposed in a big
16:39
Speaker 2: way like owning them? Does that give you a bigger
16:41
Speaker 2: pop than the owning shares of the SpaceX itself or
16:47
Speaker 2: And what's the downside of that as well?
16:49
Speaker 5: It just happens that they got in early. I wouldn't
16:51
Speaker 5: say that they've already kind of been beneficiaries of that pop.
16:54
Speaker 5: I would say so even like if you look at
16:56
Speaker 5: their holdings data just on the basis of these marks.
17:01
Speaker 5: So if I were them from their perspective, I'd say,
17:04
Speaker 5: I'm already wing with house money because I've already benefited
17:07
Speaker 5: from this because I was able to get into it
17:08
Speaker 5: so early, which I guess plays into James's point that
17:13
Speaker 5: you know, a passive investor might want to get in
17:14
Speaker 5: on that as well, faster than you could say index
17:17
Speaker 5: would let you in and.
17:18
Speaker 3: Let's just dive real quick. So for some of these funds,
17:22
Speaker 3: especially the ETFs like NASA and XOVR, they own SPVs
17:26
Speaker 3: special purpose vehicles. The people I've talked to, they aren't
17:31
Speaker 3: all like shares they can sell on day one, so
17:34
Speaker 3: some of they have they're actually locked up. So it's
17:36
Speaker 3: tricky on James, I'll let you take this one. How
17:39
Speaker 3: much SpaceX they can sell early might not be all
17:45
Speaker 3: of it. It might be some shares that are locked
17:48
Speaker 3: up and they have. If it goes down a lot,
17:49
Speaker 3: they could lose some of that pop correct, Yeah.
17:52
Speaker 4: I mean there there's some of this stuff where they're
17:54
Speaker 4: going to be locked in. I mean one of the
17:55
Speaker 4: ones that I mean you've talked about on here, you've
17:57
Speaker 4: talked about on ETFIQ XOVR. It has its exposure. And
18:01
Speaker 4: at one point when we first did this, when we
18:03
Speaker 4: looked at some of this data back in March, it
18:05
Speaker 4: had like a thirty six percent waiting in the ETF.
18:08
Speaker 4: Now it's down to like a twenty ish percent waiting,
18:10
Speaker 4: which is still a lot. That's a huge amount of
18:12
Speaker 4: exposure to get able to get access to a private
18:14
Speaker 4: company before at IPOs. But you're kind of beholden to
18:17
Speaker 4: like how much money is coming in and out and
18:19
Speaker 4: how much how many shares you can get your hands on,
18:21
Speaker 4: which is why most of these structures or funds that
18:24
Speaker 4: hold these are in the mutual fund structure because it's
18:26
Speaker 4: a little more stable. So when you look at this,
18:29
Speaker 4: the range of exposure goes from the number one is
18:31
Speaker 4: the Barn Partner's Fund BPTRX. When we just looked at this,
18:36
Speaker 4: it was thirty three percent of the fund. So that's
18:37
Speaker 4: a huge exposure Baron Barn loves musk, right, and then
18:41
Speaker 4: you go down to some of their other funds as
18:42
Speaker 4: it goes down to seven point five percent. You mentioned
18:44
Speaker 4: the Fidelity Contra fund. Yeah, it owns eight billion, but
18:47
Speaker 4: it's only five point one percent of the fund. But
18:49
Speaker 4: as Sharon said, like these these actively managed funds on
18:52
Speaker 4: the ETF or mutual fund side or what have you,
18:54
Speaker 4: they've already benefited for what's happened to SpaceX. They've already
18:57
Speaker 4: benefited from that XAI acquisition because the price pops. So
19:00
Speaker 4: all of these things are already in there, and they
19:02
Speaker 4: they're basically in front of the passive index buying wave.
19:06
Speaker 3: As far as I know, though, James I think NASA hasn't.
19:09
Speaker 3: I was talking to the guy who runs that ETF
19:13
Speaker 3: company and he said they haven't marked it up yet,
19:16
Speaker 3: which is why I think NASA came out of nowhere
19:18
Speaker 3: to like take over the space ETF category. It's only
19:21
Speaker 3: two months old and it's bigger than ARCS Fund and UFO.
19:25
Speaker 3: I think because a lot of hot money came in
19:27
Speaker 3: knowing that it's not even realized the pop yet. Again,
19:31
Speaker 3: I'm pretty sure this is correct, but that's also maybe
19:35
Speaker 3: part of the deal.
19:35
Speaker 4: Yeah, I mean, if you look at some of these numbers,
19:38
Speaker 4: like Sharun was talking about, I mean he talked about
19:40
Speaker 4: five hundred two thousand percent returns since they popped since
19:43
Speaker 4: they put in. And again it's only a directional mark.
19:45
Speaker 4: But like you can look honestly, we did it by
19:48
Speaker 4: like fund manager Sharon looked at it by specific company.
19:52
Speaker 4: But like even within some companies different funds and their
19:55
Speaker 4: holdings reportings, we don't know exactly what's doing it. There
19:57
Speaker 4: was like different valuation metrics for share so like all
20:01
Speaker 4: of these things are very different. So even if we
20:03
Speaker 4: think like the marks that these different issuers are coming
20:06
Speaker 4: up with are roughly correct, it's kind of more art
20:09
Speaker 4: than science to really understand exactly what the valuation is.
20:12
Speaker 4: And even if you go to NASA right now, like
20:14
Speaker 4: we're talking about it, it's amazing that this ETF holds it.
20:17
Speaker 4: It's still only ten percent of the fund, but that
20:18
Speaker 4: doesn't matter. People still want it.
20:20
Speaker 5: When it comes to NASA that they're very well could
20:22
Speaker 5: be a lag because you know, the inception day for
20:24
Speaker 5: NASA was I think March of this year. Barren and
20:27
Speaker 5: Fidelity they've been holding this fun for you know, five
20:30
Speaker 5: six years maybe, so the data set's imperfect because you know,
20:33
Speaker 5: there could be a lag, and plusit based on you
20:35
Speaker 5: know how often these fun companies each markup private companies
20:39
Speaker 5: up or down, but directionally at the very least, you
20:42
Speaker 5: could say that a lot of these have already benefited
20:44
Speaker 5: from it and only stand to gain from eventually being
20:47
Speaker 5: included in the index.
20:48
Speaker 2: You mentioned the Space category of ETF, which kind of
20:53
Speaker 2: almost didn't exist like five years ago. This is like
20:57
Speaker 2: a really kind of new territory. Obviously, there's new businesses
21:01
Speaker 2: that are turning up here all the time and showing
21:03
Speaker 2: that there's money. Starlink famously part of SpaceX and part
21:08
Speaker 2: of this IPO is minting money. But what do we
21:11
Speaker 2: see for the category of space ETFs beyond you know
21:16
Speaker 2: just what the ones that are obvious.
21:18
Speaker 3: So space ETFs there was I don't know, about half dozen,
21:21
Speaker 3: maybe five for many years. Then now there's about ten filed.
21:25
Speaker 3: Another couple of launched. NASA's new NASA has been a
21:29
Speaker 3: huge hit now. They grew assets by four fold this year,
21:32
Speaker 3: so they went from like one point two billion to
21:34
Speaker 3: five billion in only four or five months. So this
21:38
Speaker 3: is a really happening category. NASA is also up fifty
21:41
Speaker 3: five percent since launching, and I believe that's without the
21:44
Speaker 3: SpaceX pot but either way, there's a lot.
21:47
Speaker 2: Of hope here.
21:48
Speaker 3: And you know, when you have really growthy stocks in
21:51
Speaker 3: a thematic category, I've seen this happen. Happened with robotics
21:55
Speaker 3: ten years ago. Arc innovation, like the soccer ball just
21:59
Speaker 3: gets kicked to the part of the field. And right
22:01
Speaker 3: now space is very exciting. And I always say thematic
22:03
Speaker 3: ETFs need two things to explode in terms of growth.
22:07
Speaker 3: They need a shiny object moment, which they're having, and
22:09
Speaker 3: they need like this to tap into the imagination of
22:12
Speaker 3: the investor and be like an easy to understand narrative,
22:15
Speaker 3: and of course Elon I think really brings home. They've
22:17
Speaker 3: seen the rocket land and the thing, they've heard people
22:20
Speaker 3: talk about it. Elon really just drives the narrative home.
22:23
Speaker 3: And he's also somebody you look at and he doesn't
22:25
Speaker 3: work for the government and you're just like, yeah, this
22:27
Speaker 3: guy's going to do this. They're really going to just
22:30
Speaker 3: move into space. And then you start to think why not,
22:32
Speaker 3: Like you know, yeah, we're gonna be flying in space
22:36
Speaker 3: and no time. That's what happened with robotics. They're like,
22:39
Speaker 3: there's gonna be robots walking around and I think the
22:41
Speaker 3: narrative in the imagination is so stirred here. But again,
22:44
Speaker 3: these are very growth. You be careful using them. They're
22:47
Speaker 3: like hot sauce.
22:47
Speaker 2: There's no such thing as an AI data center in
22:49
Speaker 2: space yet, and that's a big part of the bitch.
22:52
Speaker 3: Right totally, and it's exciting. I mean, somebody was bringing
22:55
Speaker 3: up to the day that like, yeah, you maybe complain
22:56
Speaker 3: about the market being so frothy or this and that,
22:58
Speaker 3: and some of these CFA types are just.
23:01
Speaker 2: So pained by all this.
23:02
Speaker 3: They're like, oh, how can this be? It has to
23:05
Speaker 3: go down? I hate all this, but like the amount
23:08
Speaker 3: of potential for something like AI or space is almost endless.
23:12
Speaker 3: I mean you start to think about it, you're like, yeah,
23:15
Speaker 3: this is like a whole It's more than just a
23:17
Speaker 3: new planet. It's like the whole thing. And so I
23:19
Speaker 3: think how much of that gets captured and how quickly?
23:23
Speaker 2: We don't know and how to price it.
23:25
Speaker 3: But the imagination is half the battle, and that is
23:29
Speaker 3: in full force.
23:29
Speaker 2: Here, James. I'm curious how long until we see a
23:32
Speaker 2: leveraged SpaceX ETF.
23:34
Speaker 4: Well, Cerebras went iPod and it started trading around noon
23:40
Speaker 4: on the day that at iPod, and there was a
23:42
Speaker 4: two X version that opened with the market the next day.
23:44
Speaker 4: So when this thing launches, I'm assuming we'll see at
23:47
Speaker 4: least one, maybe more leveraged ETFs leverage single stock ETFs
23:51
Speaker 4: on SpaceX probably the following day would be my guess.
23:53
Speaker 3: The closest thing to a near lock in ETFs is
23:55
Speaker 3: a two x SpaceX ETF. The question is how fast
23:58
Speaker 3: they can launch. I don't even know what the rules are.
24:00
Speaker 3: My guess is tuttle and grantite shares. They're all thinking about, okay,
24:02
Speaker 3: can we launch the day before and just have no
24:04
Speaker 3: trading like, how early can we launch a two x space?
24:08
Speaker 3: Does the actual stock have to be live? And I
24:11
Speaker 3: think is it because whoever wins this phrase instant millionaire.
24:13
Speaker 2: Well we'll find out soon enough. James Sharon, thanks for
24:16
Speaker 2: joining us on Trillions.
24:17
Speaker 4: Thanks for having me, Joel and Eric, thanks for having us.
24:25
Speaker 2: Thanks for listening to Trillions until next time. You can
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Speaker 2: produced by Magnus Hendrickson and Nikeshav Pandia