It’s probably not the moonshot investors had in mind.

There’s a lot of SpaceX news this week: The company gave its first public earnings report Tuesday, just ahead of tomorrow’s massive stock lockup period ending, and a 45-foot chunk of the company’s Falcon 9 upper stage booster was poised for an (unintentional) 5,400 mph collision with the moon this morning. Whew. The big takeaway for ETFs, though, is that there will very likely be a lot more SpaceX stock on the market as of tomorrow, and much of it will make its way into funds.

“It’s now a meaningful part of the Nasdaq,” said Chuck Failla, principal of Sovereign Financial Group, describing that as the latest instance of a big index becoming concentrated in a handful of stocks (SpaceX is not yet part of the S&P 500). “How diversified, really, are some of these indexes?”

Reach for the Mars

SpaceX’s revenue for the second quarter was $7.8 billion, beating analysts’ estimates and nearly double the $4.1 billion it saw in the same quarter of 2025. Still, the company’s net loss was $541 million, though that was an improvement from the $1 billion net loss a year earlier. Even so, its share price fell early in after-hours trading, following a 9% rise during the day.

A major contributor to the company’s revenue growth was its Starlink business, which added more than a million subscribers in the quarter across 170 markets. The firm’s first V3 satellites went into orbit days ago, CEO Elon Musk said on the Tuesday earnings call. “The Starlink V3 satellite is about an order of magnitude more capable than the Starlink V2 satellite,” he said, alluding to future bandwidth demands becoming higher with a proliferation of humanoid robots. “People are really underestimating Starlink here.”

Tomorrow marks another significant day for the company, with the portion of its stock available for sale rising to more than 12% from under 5% now, thanks to the expiration of a lockup period. A flood of new shares on the market could weigh on its stock price, though the event has long been known, and investors may have been pricing that in. Regardless, it stands to increase the presence of SpaceX within ETFs.

Already, the company has been integrated in numerous funds:

• SpaceX is part of at least 179 US ETFs, per data from Morningstar.
• The biggest position is within Invesco’s QQQ Trust, which holds nearly $6 billion in the company.
• Additional share lockups expiring on Aug. 20 and in late September could further increase its exposure within ETFs.

Heavy Lifting: While the moon impact wasn’t a part of the company’s earnings presentation, the Falcon rocket was, namely that the Starship spacecraft that will replace it has a much larger payload capacity. Currently, Falcon delivers about 2,500 tons of mass into orbit per year, Musk said. “We deliver 80-90% of total Earth-mass-to-orbit per year with Falcon. With Starship, our aspirations … are to deliver well over a million, and ultimately 10 million tons per year.”

I don’t care to belong to any club that will have me as a member.

The famed comedian Groucho Marx may have been kidding, but would investors feel the same way if they had to go through an approval process to use volatile ETFs? Leveraged funds, including those focused on single stocks, have exploded in number and popularity in recent years. But the products are so potentially dangerous in the wrong hands that Bloomberg’s editorial board suggested this week that brokerages should restrict access to customers who haven’t been vetted, and that strategies should be limited to 2x leverage. The op-ed piece followed disastrous episodes of South Korean leveraged ETFs crashing as chip-maker stocks fell. And it comes as the Securities and Exchange Commission has effectively blocked any new funds aiming to use more than 2x leverage.

“It’s hard to imagine the retail investors that these kinds of products would make any sense for,” said Corey Frayer, director of investor protection at the Consumer Federation of America. “They are at best high volatility gambling. And they are at worst a cash grab for management fees … with the lure of outsized returns.”

The Velvet Rope Approach

Making traders jump through hoops has limitations, as shown by South Korea, Bloomberg’s board pointed out. Despite needing training courses to gain access, those ETFs have been (or were) popular among investors. Newer restrictions in that country have reportedly driven at least some traders to use US leveraged products. Of course, US traders are a different matter, and the companies that provide such funds disclose that they are intended to be held very short term, generally not across multiple days.

Even so, financial literacy is low in the US relative to other countries:

• Just 13% of people had high financial literacy, according to results of a recent survey by Allianz that tested investors on their knowledge.
• Meanwhile, 33% had low financial literacy scores.
• In the US, as is the case globally, confidence and competence don’t match up. Over a quarter of US respondents said they were more knowledgeable than the average investor.

“We see this gap between financial confidence and financial competence,” said Simon Krause, an Allianz economist and author of the company’s report, adding that more people have been turning to artificial intelligence for advice, which further inflates their confidence. “That is worrisome.”

Let This Be a Warning: To be fair, issuers are quick to point out that their products should only be used by experienced traders. And it might be a step too far to ban leveraged funds outright, but giving them the equivalent of a flashing red light to alert users of the possible magnified losses would be useful, said Benjamin Schiffrin, director of securities policy for Better Markets. That could also include a point-of-sale message showing how a leveraged fund’s returns can diverge from those of individual stocks. “They’re probably inappropriate for retail investors, but they’re being heavily marketed to retail investors,” he said. “We need to do a better job of regulating to whom they’re sold.”

Dual share classes are officially invited to the party, but they might be a tad late.

Sure, the Securities and Exchange Commission greenlit dual share class applications late last year, but the industry is now facing a major obstacle: A lack of back-office capabilities, or the operational legwork behind actually offering an ETF share class of a mutual fund. Transferring clients’ mutual fund shares to an ETF share class, and being able to do so quickly and tax-free, is much easier said than done, said Dan Sotiroff, associate director at Morningstar. Issuers are wrestling with how to speed up the conversion process, and whether it even makes sense for their clients.

“[Issuers are] still waiting on what has been termed this industry-wide standard … where everybody will be operating on the same protocol,” he said. “It’s just kind of clunky right now.”

Easier Said Than Dual

One reason behind the clunkiness has to do with the different parties involved in transferring shares. The mutual fund’s asset manager has to freeze the investor’s shares and make the exchange with the relevant custodian before sending it back to the broker, who actually puts the shares in the investor’s account. That whole process can take up to two to three weeks in some cases, Sotiroff said. And because most asset managers don’t have the necessary in-house brokerage platform, they have no choice but to go through that process.

“Your shares are still appreciating in value, so you’re not missing out on anything,” Sotiroff said. “But if you wanted to sell, your shares could potentially be locked up for days, if not weeks.”

I’ll (12)B Darned: Also at stake for issuers is whether to make the dual share class available in the first place, said Evan Skalski, senior partner at Alpha FMC. Some providers have 12b-1 agreements in place for their mutual funds, under which the funds can charge marketing and distribution fees. For these providers, it might not make sense to offer an ETF share class if it means losing out on that relationship with a distribution partner.

“Do [issuers] end up losing AUM on their platform if more folks want to move into the ETF share class?” Skalski asked, adding that they now need to decide what happens to assets that migrate out of those mutual funds. “It is a decision for key buyers and heads of distribution at some of the large wirehouses and broker-dealers.”