One Month Out From its IPO, Advisors Urge Discipline on SpaceX
Financial advisors say most public companies underperform for at least a year post-IPO, and investors should ask themselves whether conviction or FOMO is driving their interest.
Over a month after SpaceX debuted in the public markets, financial advisors continue to see little reason for investors to rush into the stock, noting that clients have to be honest with themselves about why they want exposure to the company.
Investors in ETFs that track the Nasdaq 100 already have exposure to SpaceX, since the index’s new methodology helped fast-track the company into it. However, since indexes are float-adjusted, “investors should remember that [SpaceX’s] public float would likely represent only a small fraction of the company’s total value,” wrote Sam Huszczo, CIO at Lathrup Village, Mich.-based RIA SGH Wealth Management, in an email.
Both Martin Adams and Huszczo suspect that many investors today are driven by FOMO. Since many of the big names announcing plans to go public in the coming months have stayed private far longer than is historically the norm, retail investors have a better understanding of what they do and their potential impact on the economy, said Martin Adams. “There is a lot of pent-up demand for ownership, but it’s difficult to distinguish that from a fear of missing out in this environment. I think it’s a little bit of both.”
Huszczo pointed to how quickly leveraged products and options activity appeared around SpaceX stock a few days after the IPO—over a million options in SpaceX traded on June 16, while at least 11 leveraged SpaceX ETFs launched by the same date—as a sign that FOMO might be driving investor behavior. “Whenever investors become more excited about the wrapper than the underlying investment, it’s worth slowing down,” he wrote.
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