How to Invest in SpaceX Before Its IPO and How Much It Costs

Elon Musk’s SpaceX Files for IPO, Making History

After years of speculation and anticipation, Elon Musk has confidentially filed for an initial public offering (IPO) for SpaceX with the U.S. Securities and Exchange Commission. This move positions the aerospace and artificial intelligence company, founded by Musk in 2002, to potentially go public as early as June. Notably, this sets the stage for Musk, the world’s richest man, to become the first CEO to lead two publicly traded companies with valuations exceeding $1 trillion.

While traditional access to IPOs is typically limited to institutional investors and accredited individuals, there is a way for everyday investors to potentially gain exposure to SpaceX before its public debut, albeit at a premium price. However, the details of this option come with some significant considerations.

SpaceX’s IPO is expected to be one for the history books, with the company aiming to raise between $50 billion and $75 billion through its public offering. This would make it the largest IPO in history, surpassing the $25.6 billion raised by Saudi Aramco in 2019. With a target valuation of $2 trillion, SpaceX could rank as the sixth-largest publicly traded company, trailing only tech giants like Nvidia, Apple, Alphabet, Microsoft, and Amazon.

One of the key attractions for investors is SpaceX’s diverse revenue streams, including rocket launch services, the Starlink satellite business segment, and its recent merger with xAI, a large language models company. Starlink, in particular, offers high-speed, low-latency space-based internet subscriptions to over 10 million customers worldwide, supported by a fleet of more than 10,000 satellites in orbit.

Furthermore, SpaceX’s status as a premier government contractor, having secured substantial federal contracts with agencies like NASA and the U.S. Department of Defense, adds to its appeal. The recent integration of xAI into the SpaceX ecosystem introduces additional revenue sources, including Colossus, the world’s most powerful AI supercomputer. This merger positions SpaceX to develop space-based data centers powered by solar-equipped satellites, expanding its AI computing capabilities.

For retail investors looking to potentially invest in SpaceX before its IPO, the ARK Venture Fund (ARKVX) offers a unique opportunity. Managed by Ark Invest, led by renowned investor Cathie Wood, the fund focuses on venture capital-style investments, including SpaceX. However, it’s essential to note that ARKVX is a closed-end interval fund, which may invest in alternative assets like private equity and can present liquidity challenges.

While the official date of SpaceX’s public listing is yet to be announced, the company’s IPO promises to be a landmark event in the financial world. As Musk’s visionary ventures continue to push the boundaries of innovation, the opportunity to invest in SpaceX represents a chance to participate in shaping the future of space exploration and technology. Shareholders of interval funds face a unique challenge when it comes to selling their shares. Unlike traditional mutual funds or exchange-traded funds (ETFs) where investors can freely buy and sell shares at any time, interval funds restrict the ability to sell until specific repurchase windows open.

One example of this is the ARK Venture Fund, which offers quarterly repurchase opportunities for shareholders. However, a disclosure on Ark’s official website warns investors of the potential illiquidity risk associated with the fund. It states that shareholders should not expect to sell their shares outside of the quarterly repurchase policy, regardless of the fund’s performance. Additionally, there is no guarantee that all tendered shares will be sold during a repurchase offer.

The disclosure further emphasizes that investing in the ARK Venture Fund is not suitable for investors seeking immediate liquidity, as shares are not redeemable except through the fund’s repurchase policy.

Palash S. Islam, CEO of Singer Financial Group, acknowledges that this lack of liquidity is not necessarily a red flag, but he advises caution for investors considering entering the fund at this point. Islam highlights the challenges of investing in a fund like ARK Venture Fund, which provides exposure to pre-IPO companies through a retail wrapper that may lack transparency and flexibility.

One key consideration for investors is the fund’s annual fees, which currently stand at 3.49%, significantly higher than the average expense ratio for actively managed ETFs. Even with a 0.59% expense reimbursement and fee waiver, the net expense ratio of the ARK Venture Fund is 2.90%, substantially higher than industry norms.

Despite these conditions, shares of the fund are available through platforms like SoFi and Titan with a $500 minimum investment. The fund’s portfolio includes top holdings like SpaceX, OpenAI, Anthropic, and other tech startups that could potentially see IPOs in the future.

While some clients may be drawn to the prospect of gaining access to pre-IPO companies through funds like ARK Venture Fund, Islam advises against chasing returns and emphasizes the importance of long-term investment strategies.

In conclusion, the illiquidity and higher fees associated with interval funds like the ARK Venture Fund may not be suitable for all investors. It is essential to carefully consider the risks and limitations before investing in such funds and to align investment decisions with long-term financial goals.