A bid by individual investors to grab a sliver of

Space Exploration Technologies Corp.

(SpaceX) before it goes public has propelled a niche

ETF

into the spotlight, highlighting retail euphoria over

Elon Musk

’s business empire and the scramble for access to equity in private companies.

The ERShares Private-Public Crossover ETF (ticker XOVR) has taken in more than US$470 million since Dec. 8 — more than half its total assets — as investors seek to get in on what could become the biggest initial public offering ever.

The catalyst: A Bloomberg News report this month that Musk’s rocket company is targeting a 2026 listing that could raise more than US$30 billion and value it at about US$1.5 trillion. The ERShares ETF is drawing attention because it holds a small piece of SpaceX through a special-purpose vehicle, potentially making it the only U.S.-listed ETF with exposure, according to an analysis of Bloomberg-compiled data by Bloomberg Intelligence’s Breanne Dougherty.

That has turned XOVR, launched in 2017, into a speculative wrapper for Musk Inc.

“This surge is likely linked to SpaceX stating a 2026 IPO target,” BI’s Dougherty and Charles Bond wrote. “Just the hint of a SpaceX IPO — now lightly penciled in for late 2026 — hit the trifecta of investor obsessions: breakthrough innovation,” a privately held startup valued at over US$10 billion “and a revived IPO pulse.”

The ETF gained exposure to the Musk-led company via a special purpose vehicle in December 2024, offering rare access to the private company.

At that time, ERShares had a total investment of more than US$20 million in SpaceX, which represented roughly 12 per cent of the ETF’s assets, according to a press release.

SpaceX was XOVR’s first private holding after the fund company changed its name in August 2024 and added private entities to its investing mandate, which also includes public entrepreneurial ventures. However, as money rolled into the fund, the SpaceX holding shrunk to about four per cent of its assets, data compiled by Bloomberg shows, making it XOVR’s fourth-largest holding after Nvidia Corp., Meta Platforms Inc. and Maplebear Inc.

Joel Shulman, founder and chief investment officer of ERShares, said the team is actively exploring opportunities to increase exposure to these investments. He acknowledges that rapid growth in any fund “naturally dilutes any positions that are, by their nature, more difficult to increase quickly, such as a private asset investment.” He also noted that any fair value assessment will be conducted in accordance with the requirements of the Investment Company Act of 1940 and generally accepted accounting principles.

To Jeffrey Ptak, a managing director at Morningstar Inc., the SpaceX position has become such a small part of the portfolio that even if the issuer marks it higher — as many investors expect — the effect on overall performance would be marginal. Since the holding isn’t changing while the fund continues to attract cash, most of that inflow is likely being allocated to publicly traded stocks, further diluting SpaceX’s share of the portfolio, he said.

The ETF values its existing stake at US$185 per share, far below recent secondary-market prices, says Dave Nadig, president and director of research at ETF.com. That low valuation keeps the position artificially small, which previously helped the ETF stay under concentration limits. Now, however, it can’t add to the position without revising that marked price.

So if SpaceX went public at around US$420, the set per-share price from a secondary offering this month, the fund’s stake would see a significant pop. Marking the position to market would lift its net asset value — the per-share value of the fund — by roughly four per cent, according to Nadig.

Even so, investors wouldn’t necessarily capture that full gain, he said, because anyone who bought the ETF as it surged recently risks seeing much of the boost erased as sellers emerge after the IPO.

“This is all a very long way of saying: there is no free lunch,” Nadig said. “The more this looks like ‘free money’ the less likely it actually will be.”

While proponents have insisted that ETFs can hold everything and anything, Morningstar’s Ptak says some assets may be best left out.

“It’s incongruous to hold these kinds of instruments in a daily liquidity vehicle like an ETF,” he said. “It is “rife with confusion, which you’re seeing writ large right now, with people diving into XOVR in the belief they’ll see some huge payoff from SpaceX.”

  • Elon Musk’s SpaceX sets US$800 billion valuation, confirms 2026 IPO plans
  • SpaceX IPO plan puts US$2.9 trillion of listings on the table

—With assistance from Emily Graffeo and Nathaniel Popper.

Bloomberg.com