SEC Filings Just Revealed the Smart Money Is Overweight SpaceX. Should You Buy It Now?

One of the most anticipated IPOs in a long time, Space Exploration Technologies (NASDAQ: SPCX), went public in mid-June, shattering records for new issues. SpaceX raised $86 billion in total from its IPO, valuing the company at about $1.77 trillion.

Now that SpaceX is a publicly traded company, institutional investors are required to disclose any stakes in the company on their quarterly 13F filings. Form 13F shows publicly traded U.S. stock positions held by institutional investors with more than $100 million under management at the end of each quarter, and they must be filed within 45 days of the end of each quarter. That means Aug. 14 revealed exactly which big institutional investors held SpaceX shares at the end of the quarter and how much they owned.

The so-called "smart money" is overweight in SpaceX relative to the total market. Should small retail investors join in?

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Who owns SpaceX stock?

SpaceX stock appeared in 1,932 13F filings last quarter. The total value held by institutional investors was $611 billion. Goldman Sachs analysts found SpaceX was widely held among hedge fund managers, and mutual funds as a group were overweight in the stock. Pension funds and endowments also owned significant stakes in the space stock. And 13F filers with SpaceX in their reports included several early investors that held massive stakes in the company.

The biggest SpaceX shareholders were Alphabet, private equity investor Valor Management, and Fidelity Investments. All three were early investors in SpaceX, with Alphabet and Fidelity investing $1 billion in the company back in 2015, and Valor first partnering with SpaceX in 2008. As of the end of June, the three held approximately $232 billion in stock. There are several other early investors that top the list, with huge equity stakes in the business.

It's also possible that hedge funds gained access to the stock before it was publicly traded. Mutual funds, however, are the strongest signal that investment managers believe the stock could produce strong returns. That said, it could be a form of job protection. Managers could look foolish if they didn't buy SpaceX stock and it exploded higher, but they won't look so foolish just for buying the most highly anticipated IPO in a long time, regardless of whether it goes up or down.

The first 13F filings revealing stakes in SpaceX don't actually tell us much about how smart money feels about the company now that it's a publicly traded stock. We'll need to wait until the next quarterly filing to see how things change. It doesn't help that there's a 45-day delay between the end of the quarter and the filing's release. And that puts retail investors in a precarious position.

Why the smart money could make retail investors pay

SpaceX only sold about 5% of the company to public investors at its IPO. CEO Elon Musk owns about 48% of shares, and he has said he doesn't plan to sell any. That left roughly 47% of shares with early investors or insiders, who are subject to lockups following the IPO. SpaceX is using a staggered lockup expiration to release shares slowly into the market to avoid market shocks.

While some of the 1,932 institutional investors reporting SpaceX stock on their 13Fs last quarter were buyers into the IPO, it remains to be seen whether those mutual funds and hedge funds buying the stock can offset the selling pressure from early investors when lockups expire. We already saw two big lockup expirations in August. The market absorbed the first one quite well, but the second expiration put pressure on the share price.

There are six more lockup expirations before the end of 2026, including two more before the end of the third quarter. What big early investors like Alphabet, Valor, and Fidelity do will be a key data point for investors to consider, but we won't know their moves until mid-November.

Meanwhile, SpaceX stock is extremely expensive. The largest growth driver for the business in the near term is its neocloud operations, selling AI compute to supply-constrained AI labs. While the revenue is substantial, so are the capital expenditures. The business's long-term profitability relies on its reusable rocket technology, which increases its capacity to launch satellites that serve both the compute and connectivity markets. That makes the stock very risky and more subject to market forces than fundamental earnings results in the near term. As a result, the actions of large institutional investors will have a significant impact on retail investors for some time, even if they plan to buy and hold for the long term.

SpaceX could turn out to be a great long-term investment, but with the high valuation and high level of uncertainty, and potential institutional selling, it might be worth waiting for more clarity and a more attractive entry point.

Adam Levy has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Goldman Sachs Group. The Motley Fool has a disclosure policy.