Ark Invest, led by Cathie Wood, has recently increased its holdings in Space Exploration Technologies (SpaceX) by nearly 230,000 shares in late July. This acquisition occurred despite a notable 31% decline in SpaceX's stock price, pushing it below its IPO value of $135 to approximately $108 per share. Wood, a strong proponent of SpaceX, has previously declared it could become the most historically significant company globally. However, for everyday investors, it is advisable to approach such decisions with greater prudence, considering Ark Invest's inconsistent track record.
Ark Invest, through its various exchange-traded funds (ETFs), bolstered its positions in both SpaceX and Tesla (another company spearheaded by Elon Musk) on July 27 and 28, committing a total of $47.3 million. SpaceX features prominently in several Ark Invest ETFs, including the flagship ARK Innovation ETF (ARKK), which held roughly $283 million in SpaceX stock by July 31, and the ARK Autonomous Technology & Robotics ETF (ARKQ), with holdings valued at approximately $113 million.
Despite Cathie Wood's enthusiastic endorsement and recent purchases, her investment firm's overall performance record suggests a degree of caution is warranted. The ARK Innovation ETF has experienced a 41% decrease in value over the past five years, significantly underperforming the S&P 500, which saw a 70% gain during the same period. While the ARK Autonomous Technology & Robotics ETF fared better, its 42% return over five years still lagged behind the S&P 500.
Many analysts argue that SpaceX's initial public offering valuation was excessively high. At the time, the company commanded a valuation of $1.77 trillion, trading at around 95 times its projected 2025 sales of $18.7 billion. In such scenarios, a stock price dip does not automatically signal a buying opportunity.
Furthermore, an important date for SpaceX is the expiration of its insider lockup period, set to begin on August 6, 2026, with shares gradually becoming available until December 8, 2026. While the release of insider shares could enhance the stock's liquidity and potentially reduce volatility, it also carries the risk of increased selling pressure as insiders may seek to capitalize on their profits.
While Cathie Wood's optimistic outlook foresees SpaceX becoming a colossal entity, leading to a current bargain price, her predictions have often been characterized by extreme optimism, particularly concerning artificial intelligence stocks and cryptocurrencies. For a more conservative perspective, Morningstar assesses SpaceX's fair value at $63 per share. Although the presence of Elon Musk as CEO might command a premium, many market observers, including myself, believe the stock remains overpriced. It would be prudent to await forthcoming earnings reports and observe the market's reaction to the expiring lockup periods before considering an investment in this otherwise captivating enterprise.
