SpaceX stock has been on a tear recently. The company’s valuation jumped from $250 billion to $350 billion in just a week due to overwhelming demand to an upcoming tender offer. Accredited investors (those meeting income or net worth thresholds) had the first crack at these shares, leaving retail investors sidelined. Fortunately, new options for retail investors have surfaced, including closed-end funds, interval funds, and ETFs. Let’s break down these options and see which makes the most sense for you.
Closed-End Funds: Destiny Tech 100
Closed-end funds have fixed holdings, and their prices rise or fall with demand. Typically, these funds trade slightly below their net asset value (NAV), but Destiny Tech 100 is an exception. Its market value is an eye-popping 11.5 times its NAV ($667.6m market cap/$57.8m NAV. Even after adjusting the NAV for the current SpaceX $185 price, the NAV rises to only $71.8m with a premium of 9.3x ($667.6/$71.8). This means that investors are effectively paying for a SpaceX position at $3.25 trillion valuation rather than the actual $350 billion.
For context, while the fund is currently trading at $61.36, the true NAV per share would be closer to $6.60 ($61.36/9.3). This is closer to the true NAV per share even after adjusting the SpaceX position to the current level. Add to that an annual fee of 2.5%, and it becomes clear that this fund may not offer good value for SpaceX exposure.
Interval Funds: Ark Ventures
Interval funds like Ark Ventures impose stricter rules on liquidity. Shares can only be redeemed quarterly, with a limitation of only 5% of total AUM. This implies that investors may not be able to get their funds when they want or need them. Moreover, fees are even higher here, at 2.9% annually, and there’s a $500 minimum investment requirement. While this fund does provide access to SpaceX, these drawbacks make it unattractive for many retail investors who are cost conscious or who desire daily liquidity.
ETFs: XOVR ETF
XOVR ETF is the first and only ETF that allows retail investors an opportunity to buy private equity such as SpaceX. It is, by far, the most retail-friendly option. They’re priced daily to NAV, ensuring that you don’t overpay for the underlying assets. The annual management fee is just 0.75%, which is a appreciably less than closed end funds, and shares can be traded freely on the market with daily liquidity. SpaceX is the top holding, and the fund also invests heavily (85%+) in the Entrepreneur 30 Total Return Index (ER30TR), which is arguably one of the top indices over the past 20 years. Since the Index 6/30/2005 inception the ER30TR Index has delivered +2069% vs 643% SPX, 592% Dow 30, 968% Russell 1000G, 1564% QQQ. (Disclosure note: past performance is no guide or guarantee to future performance).
With no minimum investment, daily liquidity, priced to NAV and low fees, XOVR offers a balanced, cost-effective, and transparent way to gain SpaceX exposure.
The Bottom Line
If you’re looking to invest in SpaceX, it’s important to choose a method that aligns with your financial goals and risk tolerance. Closed-end funds like Destiny Tech 100 come with inflated premiums, while interval funds like Ark Ventures limit liquidity and charge high fees. The XOVR ETF stands out as arguably the best option, combining low fees, easy access, and a fair valuation. For most retail investors, it’s probably the most efficient way to ride SpaceX’s stock trajectory.
Past performance is no guarantee of future results. Please refer to the below disclosures: https://lnkd.in/e29X6rN
Read the full article here