Seven Weeks of Fundraising: 1.3 Billion, Yet SpaceX’s Weight Gets Cut in Half—The Dilution Trap of NASA ETFs

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Author: Deep Tide TechFlow

On May 20th, the SEC website listed SpaceX's S-1 prospectus. The next day, a fund called "NASA" with a code, raised $375 million in a single day, tripling its AUM within a week. And just seven weeks ago, this fund was just born.

After seven weeks, it has become the world's largest space-themed ETF, far surpassing the veteran UFO that has been running for seven years. The amount raised in seven weeks is more than UFO's total over seven years.

Everyone rushing into NASA wants to buy SpaceX. But the actual SpaceX shares they get are becoming fewer and fewer.

Where did the money go?

The flagship of the NASA ETF is "the only pure space ETF in the market that holds SpaceX." As of May 21, NASA indirectly held 232k shares of SpaceX common stock equivalents through an SPV, with a book value of $147.4 million, implying an estimated valuation of about $1.51 trillion.

The numbers look substantial. But there's a detail that ordinary investors wouldn't notice at all. According to ETF.com, a week ago, NASA's position in SpaceX accounted for 10.3%. A week later, it was diluted to 4.6%.

Because the inflow of subscription money was too fast, the fund manager didn't have time to acquire SpaceX shares on the secondary market. A large amount of new money was forced to buy publicly traded space stocks, which in turn diluted the SpaceX holdings that investors originally wanted to buy.

Retail investors rushing in to buy SpaceX ended up buying Rocket Lab, AST SpaceMobile, and a bunch of other targets.

More subtly, there's the valuation mechanism. The SPV holdings are only updated when Tema itself makes trades. In other words, no matter how the secondary market price of SpaceX fluctuates, the book value of the portion held by NASA remains unchanged.

This setup doesn't matter in a bull market. If the stock price drops after listing, the SPV will respond with an almost eerie "delay." Not to mention, this SPV will be locked for 6 months after SpaceX's official IPO. If the opening price crashes, retail investors can run away, but the SPV cannot.

The ETF charges a 0.87% management fee annually, but about 65% of the apparent gains come from already skyrocketing targets like Rocket Lab and Intuitive Machines. SpaceX? It hasn't contributed much.

NASA's current essence is a thematic fund that uses SpaceX as bait, loaded with a bunch of small space stocks. The bait's appeal is important, but what’s served on the plate are different fish.

Valuation Inversion

Many people don't realize that some of the main targets in this sector have already gone through a round of price increases.

Rocket Lab rose 357% in the past 12 months; Planet Labs surged 979%; LUNR increased 212%. ARKX gained 62% over the past year, ROKT up 75%. SpaceX only ignited a dry tinder that was already smoldering.

Looking at these numbers, the problem becomes clear. Planet Labs rose 979% in a year, but its main business is selling satellite imagery data. Does its fundamentals justify a nearly 10x valuation?

In 2019, global orbital launches totaled 102 times; by 2025, it will reach 342, more than double the peak of the 1967 space race. Grand View Research predicts the global space industry will reach $466 billion in 2024, growing to $769 billion by 2030.

But the question is, with the industry growing from $466 billion to $769 billion, why does the secondary market see a 10x increase in valuation?

This is a classic valuation inversion scenario. Fundamentals grow linearly, stock prices grow exponentially, and the difference is made up by "narrative premiums." The only source of narrative premium is the upcoming IPO of SpaceX.

What exactly are the retail investors getting when they buy in?

Back to SpaceX itself.

In 2024, revenue is projected at $18.67 billion, up from $10.3 billion in 2023. But in 2024, losses are $4.59 billion, compared to a $791 million profit in 2023, turning from profit to loss.

CNN reports that last year, SpaceX lost nearly $5 billion, mainly due to its AI division burning cash building data centers.

SpaceX disclosed in its IPO prospectus that xAI has been integrated into SpaceX, and X (formerly Twitter) is also included. This so-called "space IPO" is essentially a big package of Musk's entire assets. The prospectus also revealed that Musk controls 85% of the voting rights; unless he votes to remove himself, no one can move him.

A $1.75 trillion valuation for SpaceX corresponds to a "space + AI + satellite internet + social media" four-in-one narrative. The bigger the narrative, the more inflated the price.

But the secondary market doesn't care about these. It cares that everyone is rushing to get on the train, so I have to get on too.

In the end, the biggest winners are not SpaceX retail shareholders, who haven't even gotten on the train; nor the ETF investors rushing into NASA, whose SpaceX holdings are being diluted.

The most profitable are ETF issuers. NASA's fee rate is 0.87%, the third highest among similar funds. With $1.3 billion in AUM, that means about $11 million in management fees annually.

The essence of issuing ETFs is similar to issuing tokens—you need a story, a timing, and a seemingly reasonable benchmark. SpaceX provides all three.

Written before the IPO

On June 12th, SpaceX is expected to go public on NASDAQ under the ticker SPCX. The underwriting syndicate is led by some of the world's largest investment banks, with a fundraising target of $40 billion to $80 billion, far exceeding the record set by Saudi Aramco in 2020.

This will be the largest IPO in human history.

If it opens below the offering price, all ETF investors who bought into the SpaceX story will find that their SPV positions are still marked at the "old price" from months ago, unable to sell immediately or exit quickly.

If it opens with a surge, those who didn't buy the ETF will rush in, further pushing up the ETF's premium, diluting SpaceX's actual weight in the ETF, creating a bizarre reverse flywheel—more buyers, but each gets less SpaceX.

After SpaceX, many industry giants are lining up to go public. Each "concept sector leader" will spawn a new batch of ETFs. Each new ETF will repeat the same dilution game.

The industry isn't short of new stories; what’s lacking are people asking, "Did I really buy what I thought I bought?" After June 12th, there will be an answer. But by then, those rushing into NASA today won't care about the answer—they'll either be counting their money or fighting for their rights.