SpaceX leveraged fund providers hit by day-one launch setback, sources say

By Suzanne McGee

PROVIDENCE, Rhode Island, June 12 (Reuters) – Asset managers eager to roll out leveraged exchange-traded funds tied to SpaceX on its first trading day have been told to delay the launch until Monday, four sources familiar with the matter said.

The setback denies speculators and traders a chance to capture the full benefits of a first-day pop in the shares of the blockbuster IPO, while managers will have to wait for the influx of capital into their products. 

“We had really wanted to be out on Friday,” said Matt Markiewicz, head of product and capital markets at Tradr ETFs, declining to comment on the delay. The firm’s 2x long and 2x short ETFs will now debut Monday on Cboe Global Markets. 

“There is a lot at stake; these products could end up holding a total of more than $10 billion” in assets, Markiewicz added.

Asset managers seeking SEC approval to launch the ETFs had hoped to trade in lockstep with SpaceX’s market debut, several of the issuers said.

Instead, exchanges told them on Wednesday the listings would need to be pushed to the first trading day following the IPO, according to four sources. The exchanges cited SEC concerns that coupling the ETF launches with leveraged products could complicate the SpaceX debut, three sources said.

The sole issuer to duck the SEC restrictions was Defiance ETFs, which rolled out its actively managed Defiance Daily 2x Space ETF, a re-launch of a product that debuted in April and that, under its new strategy, will hold stakes in one to five pure-play space economy companies. At the time of the re-launch Friday morning, the fund held exposure only to SpaceX, having acquired a block of shares at the IPO price, Defiance Chief Investment Officer Sylvia Jablonski told Reuters.

“This makes it the only product able to offer first-day leveraged exposure,” Jablonski said. 

As of midday on Friday, the ETF had already traded nearly a million shares and intraday had soared as much as 56% before being halted by Cboe Global Markets. Jablonski told Reuters she was unaware of the reason for the halt. Cboe could not immediately be reached for comment.

Defiance also plans to launch a SpaceX-only 2x leveraged ETF on Monday, Jablonski said.

The SEC did not respond to requests for comment about the broader delays in launching the raft of new products. A spokesman for the Nasdaq Stock Market, which will be home to the SpaceX IPO as well as to some of the ETFs, declined comment. Cboe Global Markets and the New York Stock Exchange could not immediately be reached for comment. 

While there is no precedent for leveraged funds – introduced in the U.S. less than four years ago and surging in number over the past 12 months – to launch alongside an underlying stock, asset managers had hoped to gain an edge in what analysts say could be a multibillion-dollar race for assets in the first weeks of trading.

“There are billions at stake in the first few weeks alone,” said Todd Sohn, an ETF analyst at Strategas.

Major players in the leveraged stock arena, including Direxion, GraniteShares, ProShares and Defiance, plan to roll out 2x leveraged long ETFs as soon as they are permitted to do so, according to their filings and advertisements on investment forums and social media sites. 

“Investors will have multiple options; they will be able to get SpaceX exposure because of early entry on the part of passive index providers, or through the stock itself, or through the leveraged (ETF) ecosystem, which adds up to a pretty robust mechanism for price discovery,” said Simeon Hyman, global investment strategist at ProShares. 

He said his firm had no plans to launch early and was comfortable waiting until Monday. “The intent of everybody is to have this (IPO) work smoothly.”

(Reporting by Suzanne McGee in Rhode Island; Editing by Megan Davies and Shri Navaratnam)