How You Might Easily and Safely Gain Exposure to SpaceX After Its IPO

One of the most anticipated investing events of the year may be just weeks away. I'm talking about the initial public offering of Elon Musk's SpaceX. The company, with business in space infrastructure, rocket launches, satellite-based internet services, and AI, confidentially filed for an IPO with the Securities and Exchange Commission early last month.

SpaceX's IPO is on track to be the biggest ever, with a valuation targeting as much as $1.75 trillion, Reuters reported earlier. Details of the timeline haven't been confirmed, but press reports suggest the company will make its prospectus public in late May, hold a roadshow in early June, and the IPO would follow a few weeks later. Reuters also reported that Musk aims to allot up to 30% of shares to retail investors, making the SpaceX IPO a major event for investors like you and me.

That said, you might not be able to get in on the IPO, or you may hesitate to buy SpaceX shares right away. But don't worry. Here's how you could easily and safely gain exposure to SpaceX after the big event.

Image source: Getty Images.

Betting on SpaceX and more

I may surprise you when I say you don't have to directly buy SpaceX shares to benefit from its performance in the quarters and years to come. Instead, you could invest in an instrument that holds shares of SpaceX -- and other companies in the space industry. And this type of asset is an exchange-traded fund (ETF).

I love ETFs because they allow you to invest in exciting and dynamic players -- even stocks that could be considered a bit risky -- but you won't have to worry much about that risk. This is because, as part of a group of well-chosen stocks, any fluctuations in a few stocks won't impact overall performance by much.

I also like the fact that ETFs offer diversification across a sector or theme, so ideally, you can benefit from the successes of many companies instead of betting on just one or two.

Of course, it's impossible to predict which ETFs will buy SpaceX shares, but two to keep your eye on are the Ark Space & Defense Innovation ETF (NYSEMKT: ARKX) and the Procure Space ETF (NASDAQ: UFO).

Cathie Wood and SpaceX

Ark Invest operates the former -- and this fund management company, led by famous investor Cathie Wood, already has shown its interest in SpaceX. This is through the Ark Venture Fund, which invests in private and public companies. In fact, the venture fund's biggest holding is SpaceX, representing about 13% of assets.

Considering this, it wouldn't be surprising to see Ark Space & Defense ETF take a position in SpaceX. This fund focuses on a broad range of companies within this theme, in areas such as autonomous mobility, reusable rockets, and neural networks. The biggest holding is Rocket Lab, a spacecraft and launch services provider, so it's easy to imagine the fund considering a player like SpaceX -- and potentially even making it a key position.

The Procure Space ETF also may be interested in picking up shares of SpaceX if the company becomes part of its index of reference: the S-Network Space Index. This index, and the fund, include names such as Rocket Lab, Planet Labs, and ViaSat -- again, it's easy to see SpaceX fitting in with these holdings.

Recent post-IPO performance

If these ETFs purchase shares of SpaceX, you'll be able to benefit from this company in an easy and safe way. This is because you won't have to scramble to get in on the IPO and instead can leisurely buy shares of the ETF when you choose; and you won't have to worry about SpaceX's post-IPO performance. In many recent IPOs, the stocks have initially gained but gone on to decline or fluctuate after reaching a peak -- the good news here is that this offers investors multiple entry points.

But, for investors who worry about this potential volatility, an ETF may offer a steadier path as the performance of many players determines its direction. This makes the strategy appropriate for both cautious and aggressive investors (though aggressive investors may aim to directly buy SpaceX shares, too.)

As mentioned, it's too early to know which ETFs will buy SpaceX shares, but the two I mention here are ones to keep on your radar screen. And getting in on SpaceX through an ETF may offer you a low-risk way of betting on this exciting space story.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Planet Labs PBC and Rocket Lab. The Motley Fool has a disclosure policy.