With CommSec set to offer Australian retail investors direct access to the potential SpaceX IPO and Betashares’ RCKT ETF also providing exposure, investors are weighing how the listing could prompt portfolio reshuffling and flow-through effects on index composition.
Earlier this week, CommSec announced it will be the lead Australian retail broker for the potential SpaceX initial public offering (IPO) after the prospectus outlined plans to offer shares directly to Australian retail investors.
In an industry first for a US mega-IPO, it means that Australian retail investors will have direct access to the offering if it proceeds.
After Betashares launched the first Space Industry ETF (ASX: RCKT) earlier this month, with an index designed to quickly add major IPOs such as SpaceX soon after listing, domestic investors will now have multiple avenues for exposure if the rocket technology company goes public.
Speaking to Investor Daily, Betashares investment strategist Hugh Lam commented on what CommSec’s announcement means for the ETF and what investors may be seeking through each investment option.
“We think the announcement validates our space industry exposure through RCKT given its fast-track inclusion mechanism for large IPOs like a potential SpaceX listing,” Lam said.
“With immense interest around how best to invest in SpaceX shares, RCKT can provide simple and quick access to companies of this scale through a liquid and efficient ETF wrapper.”
While he said some investors may be seeking exposure solely to SpaceX, it is “worth noting” there is a range of established companies across the full space value chain. To reduce single stock risk in portfolios, Lam argued RCKT provides diversified exposure for those seeking simple, liquid access to the broader theme.
“That said, SpaceX’s potential IPO would be material and if it IPOs and meets our fast-track inclusion criteria, it would be a meaningful addition to the portfolio given its scale and importance to the industry.”
The global space industry remains relatively nascent, with RCKT currently the only space-focused ETF available on the Australian market and only limited thematic exposure elsewhere on the ASX.
According to the fund’s website, its largest holdings include aerospace manufacturer Rocket Lab and satellite designer and manufacturer Spacemobile, with the US accounting for nearly three-quarters of its country allocation.
The emerging industry has been underpinned by several growth drivers, including satellite communications, defence and national security, and future infrastructure. However, as Lam noted, its evolution into a conventional investment category remains uncertain, with the ETF offering investors exposure across the value chain.
“In our view, a diversified portfolio is the best way to gain exposure to a sector of this nature. Picking winners and losers within an emerging theme can be difficult given rapidly changing industry dynamics,” he said.
Lam added that RCKT can be used as a “satellite” allocation within a broad, diversified portfolio.
Broader portfolio reshuffling
SpaceX’s potential IPO also comes amid a broader “AI IPO race”, with OpenAI reportedly accelerating its IPO timeline and Anthropic recently announcing its first quarterly profit.
With the three potentially adding up to US$3 trillion in new market capitalisation for public investors within months, questions are also emerging around how capital could be reallocated if and when the major AI players come to market.
ETF Shares chief investment officer David Tuckwell told Investor Daily there will “almost certainly” be some portfolio reshuffling by investors to accommodate the listings.
“If companies like SpaceX, OpenAI and Anthropic eventually list at very large valuations, there will almost certainly be some portfolio reshuffling to accommodate them, particularly across growth and technology indices,” Tuckwell said.
“While these firms may not initially qualify for major indices like the S&P 500 or MSCI World, they would likely become extremely significant additions to the Nasdaq 100 and other growth benchmarks.”
It comes after a new rule announced earlier this year means the Nasdaq-100 will allow newly listed large-cap companies to enter the index within 15 trading days of listing, potentially enabling companies of SpaceX’s size to join almost immediately.
While Tuckwell said markets have long been aware of these IPOs, meaning any reshuffling is likely to be gradual rather than dramatic and is unlikely to “break” the market, he argued that the transition could still create incremental selling pressure elsewhere in the index.
“In practice, the largest and most liquid stocks – Microsoft, Nvidia, Alphabet, Apple and other Magnificent 7 names – would probably absorb much of that rebalancing activity simply because of their enormous weights and liquidity.”
He added that the dynamic has historical precedent, with past mega-IPOs such as Facebook attracting enormous investor attention and liquidity at listing, without causing broad market dislocations or sustained weakness in the stocks sold to fund them.
According to Tuckwell, the “more interesting question” is whether these blockbuster listings continue drawing attention and capital toward a narrow group of perceived “generational winners”, while leaving other sectors comparatively overlooked.
Example sectors trading on far more reasonable valuations than many parts of the AI ecosystem include industrials, financials, healthcare, energy and resources.
“From a behavioural perspective, investors should probably be cautious about blindly chasing whatever narrative is most fashionable at the time. IPOs are well-known for having damaging impacts on retail investors.”
