"Out with the Pretenders": SpaceX Listing Sends 'Alternative' Stocks Tumbling

[Financial News]  

As SpaceX began trading on the NASDAQ Stock Exchange on the 12th local time, the 'alternative' stocks that had led the space theme all fell sharply.
According to CNBC, Rocket Lab, a U.S. space company, plunged more than 9%, while EchoStar, a Colorado-based networking company believed to hold an estimated 3% stake in SpaceX, fell 11%.
AST SpaceMobile, which plans to launch a satellite on a SpaceX rocket next week, also dropped nearly 16%.
Virgin Galactic Holdings, a space tourism startup, plunged 32%.
Investors who feared they would not be able to secure SpaceX shares quickly had turned to these alternative names as substitutes.
As a result, the space-themed exchange-traded funds (ETFs) Procure Space ETF (UFO) and Defiance Drone and Modern Warfare ETF (JEDI) have surged 38% and 33%, respectively, this year.
Cory Johnson, chief market strategist at Epistrophy Capital Research, said, "Those who could not buy SpaceX, or who believed they would not be able to get in on the IPO fast enough, bought these ETFs instead." He added, "That buying was not related to the quality of these companies, product demand, or cash flow." In other words, investors were not buying because they were satisfied with the performance of the companies held by the ETFs, but because they wanted to ride the wave SpaceX was creating.
Meanwhile, demand is expected to be enormous for SpaceX options, which are set to begin trading on the 16th.
Anthony Dinaier, CEO of Webull, said, "SpaceX is likely to become the most actively traded options name among retail investors." He added, "The combination of a high share price, substantial trading volume, and enormous public attention has created an ideal environment for options trading."
Dinaier also noted that pessimists who expect SpaceX's current rally to eventually reverse sharply would find short selling difficult, making options the better choice.
To short a stock, investors must borrow shares, but SpaceX shares are extremely hard to come by. By contrast, buying put options that bet on a decline would allow investors to profit if SpaceX's share price falls.
dympna@fnnews.com Song Kyung-jae Reporter