SpaceX IPO allocation snub leaves Korean ETF managers, investors waiting for liftoff

Korea failed to secure subscription allocations for newly-listed SpaceX shares as the tech company's lead underwriter, Goldman Sachs, reallocated stock amid surging demand following the company's market debut. As a result, Korean asset managers that had planned to add SpaceX shares to their portfolios have run into challenges.

Both Korea Investment Management and Mirae Asset Global Investments had planned to secure SpaceX IPO shares in advance and include them in their exchange-traded funds (ETFs). According to industry insiders, SpaceX had initially planned to allocate 2,314,815 of the 555,555,555 Class A common stock being sold in the offering to Mirae Asset Securities.

Korea Investment Management and Mirae Asset Global Investments submitted IPO subscription orders through Mirae Asset Securities.

Korea Investment Management had previously announced its intention to participate in the SpaceX IPO. Any allocated shares were to be added to the ACE U.S. Space Tech Active ETF and the Korea Investment Global Space Technology & Defense Fund. The asset manager actively promoted the plan and said on June 8 that net purchases by retail investors in the ACE U.S. Space Tech Active ETF had exceeded 60 billion won ($39.5 million) over the previous month.

Mirae Asset Global Investments was also expected to participate in the SpaceX IPO through products including the TIGER Global AI Active ETF and the TIGER Global AI Infra Active ETF.

SpaceX went public on Friday and closed at $161.11, up 19.34 percent from its initial public offering (IPO) price, a successful market debut. The company raised $75 billion in the offering, making it the largest IPO in history. 

Reversed overnight

However, the two management companies' plans collapsed after Mirae Asset Securities ultimately failed to receive any allocation from the lead underwriter, Goldman Sachs.

Korea Investment Management posted a notice on its website on Friday morning based on communications with Mirae Asset Securities.

“We have received an allocation and will announce the exact number of shares shortly,” Korea Investment Management said at the time.

Later that day, the company issued an additional notice saying the schedule for disclosing the exact allocation had been delayed due to confidentiality requirements requested by the underwriter.

The situation, however, further changed during the final allocation process.

“We were informed early this morning during the final allocation process that the lead underwriter of the SpaceX IPO had not allocated any shares available for sale to the domestic underwriting syndicate,” Korea Investment Management said. “We believed it was necessary to notify investors immediately.”

“While this outcome reflects the unique and highly variable nature of the U.S. IPO market, we fully understand that investor expectations regarding the inclusion of SpaceX IPO shares were extremely high,” Korea Investment Management added. “We sincerely apologize for having to deliver the news that no shares were allocated.”

Mirae Asset refunds customers

The number of shares disclosed in filings with the U.S. Securities and Exchange Commission (SEC) may differ from the actual final allocation of shares available for sale to investors, as the SEC filings reflect each underwriter's underwriting commitment within the syndicate.

Following Mirae Asset Securities' failure to secure allocations, it issued a full refund of subscription deposits early Saturday to its customers, including domestic individuals, corporate and institutional investors, who had participated in the SpaceX IPO offering. 

“The actual number of shares available for sale to each underwriter is determined at the sole discretion of the lead underwriter,” a Mirae Asset Securities source said. “We sincerely apologize for the inconvenience caused to clients after the allocated shares were ultimately withdrawn during that process.”

Buying on the first trading day instead

Although it was unable to secure IPO shares, Korea Investment Management said it purchased "some" SpaceX stock through open-market trading on the company's first day of listing. It did not disclose the size of the purchase.

Mirae Asset Global Investments, which manages passive ETFs, is expected to begin adding SpaceX shares to relevant funds two trading days after the listing date.

Other asset managers also plan to include SpaceX shares in space-related ETFs managed under passive strategies following the company's market debut.

Timefolio Asset Management, which operates active ETFs, was reportedly planning to add SpaceX shares to its TIME Global Spacetech and Defense Active ETF through market purchases on the first day of trading.

BY HAN YOUNG-HYE, KIM JI-YE  [[email protected]]