SpaceX may be one of the most exciting IPOs to hit the market. Aiming to sell 555.6 million shares at $135 apiece for a potentially record-breaking public offering, it won’t be cheap. While exciting, some analysts urge extreme caution. In fact, according to Morningstar, the company is worth less than half of its expected valuation.

“We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO,” Morningstar analysts said, as quoted by CNBC. “Morningstar’s discounted cash flow valuation of SpaceX is $780 billion, which is roughly 48% below its private market valuation of $1.5 trillion.”

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Of course, that won’t stop retail investors from flocking to the IPO on day one.

For those who want to avoid the Day One chaos, exchange-traded funds (ETFs) are another, “safer” way to trade the IPO, including the First Trust Equity Opportunities ETF (FPX).When we first highlighted the First Trust Equity Opportunities ETF (FPX) in February, with the SpaceX opportunity, it traded at about $163.
Today, it’s up to about $193.

With an expense ratio of 0.61%, the FPX tracks hot IPOs, giving investors access to new stocks during their initial, most crucial days on the market. By buying it, not only can you avoid paying gobs of money for IPOs that may or may not work out, but you’re also being exposed to multiple hot IPOs at the same time at a lesser cost.With the FPX, it doesn’t matter if the stock is hot or a dud; the excitement surrounding IPOs continues to send the FPX to new highs.

Sincerely,

Ian Cooper