SpaceX Rocketing into Nasdaq-100 Spurs Questions from Clients

Houston, we have another mega-cap.

SpaceX going public on the Nasdaq was a momentous occasion as it became the largest offering in history, raising roughly $75 billion in its first day. And starting today, the Elon Musk-led rocket and artificial intelligence business will be added to the Nasdaq-100, meaning every client who holds funds tied to the index now has exposure to one of the biggest companies riding the one of the biggest hype trains ever. However, despite being one of the largest companies by market cap, SpaceX won’t be among the heaviest-weighted names in the index, The Wall Street Journal reported: Only 5% of its shares were sold during the IPO. The company is expected to have an index weight of less than 1%, based on Nasdaq-100’s float-adjusted methodology. 

While the SpaceX weighting is small, for now, it’s something for advisors to monitor as clients continue asking questions about getting exposure to a company that landed the largest initial public offering in history.

Ground Control to Major Tom

There are plenty of ways to give clients exposure to the Nasdaq and ultimately SpaceX, with the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) being the most popular choices. The two funds manage roughly $600 billion in assets combined. However, other issuers are looking to undercut Invesco and provide stiff competition:

• The two Invesco ETFs have fees of 18 and 15 basis points, respectively. 
• State Street’s new SPDR Portfolio Nasdaq100 fund (QNDX) is charging just 10 bps. 
• Meanwhile, BlackRock’s upcoming iShares Nasdaq 100 ETF (IQQ) is expected to target a management fee of around 12 basis points.

Other funds with exposure to the Nasdaq include the Fidelity Nasdaq Composite ETF (ONEQ), the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) and the First Trust Nasdaq-100 Select Equal Weight ETF (QQEW).

Sitting in a Tin Can. While all of this is exciting news for SpaceX and asset managers, it may not have the biggest impact inside client portfolios. “SpaceX joining the Nasdaq-100 certainly raises questions among clients,” said Nathan Mueller, founder of BlackBird Finance. “However, it isn’t something that will warrant changes to the portfolio,” he said, adding that a long-term investment plan has to consider bonds, alternatives, international securities and plenty of US equities, most of which are found outside of the Nasdaq. “[The index] starts to feel like a smaller, less significant piece of their overall portfolio.”

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