The sponsor of the ERShares Private-Public Crossover ETF (NASDAQ:XOVR) on Monday outlined how the fund navigated the highly hyped IPO of Space Exploration Technologies Corp (NASDAQ:SPCX), or SpaceX, positioning the event as a case study for its private-public crossover investing strategy.
• What’s ahead for XOVR stock?
ERShares said XOVR was designed to give investors exposure to high-growth private companies before they reach public markets, applying what it calls a “VC Lens” across both public and private investments.
The firm argued that the SpaceX listing underscored a broader trend of category-leading companies remaining private longer and creating significant value before becoming widely accessible to public investors.
Key Developments
ERShares said the period surrounding SpaceX’s IPO served as a real-world demonstration of how its private-public crossover ETF strategy works.
The firm noted that many fast-growing companies are staying private longer, creating substantial value before public investors can access them. Through the XOVR, the asset manager seeks to bridge that gap by combining public equities with selective exposure to the private market.
The fund’s approach was shaped by lessons learned earlier this year when a surge of investor interest tied to SpaceX caused XOVR’s assets to jump from approximately $400 million to $1.8 billion.
As new money poured into the ETF, the fund’s SpaceX allocation was diluted from roughly 10% to less than 2%. In response, ERShares launched what it called a “Transparency Reset,” converting the fund’s SpaceX holdings into a 0/0 special purpose vehicle structure that carries no management or performance fees at the SPV level.
Ahead of the SpaceX IPO, ERShares also implemented a first-of-its-kind liquidity arrangement that allowed the ETF to increase its SpaceX exposure while remaining compliant with ETF regulations. According to the firm, these changes helped maintain a SpaceX weighting of about 13% to 14% even as XOVR’s assets expanded to roughly $2.4 billion.
To prevent another round of dilution, ERShares introduced a Shareholder Protection Plan before the IPO. The firm estimates that the plan blocked more than $1 billion of short-term, event-driven inflows from investors seeking temporary exposure to SpaceX through XOVR. The measures included creation controls, transaction-fee mechanisms and valuation procedures designed to preserve the benefits of the IPO for long-term shareholders.
ERShares said the strategy paid off, with XOVR’s SpaceX position generating more than $183 million in unrealized appreciation and contributing to a 30.71% gain in the ETF between March 30 and June 15.
The company said the experience demonstrated how a venture-capital-style investment approach can be applied within an ETF structure to capture opportunities across both private and public markets.
Photo: Shutterstock
