Early SpaceX investors will now reap the rewards

For nearly two decades, some of the world’s most prominent investors quietly accumulated stakes in SpaceX while the rocket maker remained largely off-limits to the public markets.

Now, with Elon Musk’s company seeking a valuation of roughly $1.8 trillion in its initial public offering, those early bets are poised to generate some of the largest paper gains in venture capital history.

Among the biggest beneficiaries are veteran stock picker Ron Baron, Cathie Wood’s Ark Invest and mutual fund giant Fidelity Investments. Also poised to win are venture firms including Founders Fund, Sequoia Capital and Andreessen Horowitz as well as hedge funds such as D1 Capital Partners and Coatue Management. Select pension funds and endowments are also set to share in the windfall.

The gains are striking for investors who backed SpaceX before its success became obvious. Baron first invested in 2017 through employee tender offers when the company was valued at less than $22 billion and has since participated in 27 funding rounds.

By the end of March, SpaceX accounted for 33% of assets in the $10.4 billion Baron Partners Fund and 25.5% of the Baron Asset Fund, making it one of the firm’s most consequential investments.

“We think that SpaceX will become the largest, most profitable company on the planet,” Baron said during an investor webcast this week. His firm has invested about $2 billion in the company over the years, a stake that has grown to roughly $12 billion, he said.

Still early in its value creation

Wood’s Ark Venture Fund has also been a major beneficiary of SpaceX’s rapid rise. The rocket maker accounted for 11.4% of the fund’s net assets as of March 31, making it the largest holding in the portfolio.

Wood said Ark views SpaceX as far more than a launch provider. “Through Starship, Starlink and the acquisition of xAI, we believe SpaceX is building vertically integrated AI infrastructure for a much larger space economy,” she told CNBC.

The investment also reflects Ark’s broader thesis around technological convergence. SpaceX sits at the intersection of several of the firm’s core innovation themes, including artificial intelligence, robotics and energy storage. Wood believes the company’s next phase of growth could be driven not only by its existing Falcon 9 launch business and Starlink satellite network, but also by Starship, the next-generation rocket system that could open new commercial opportunities in space.

“For long-term shareholders, an IPO would provide broader access to a company that we believe remains early in its value creation,” Wood said.

No traditional asset manager may have benefited more from SpaceX’s rise than Fidelity Investments. The Boston-based firm got in early through former portfolio manager Gavin Baker, who began buying shares in 2015 when SpaceX was valued at just about $10 billion.

As of March 31, SpaceX accounted for 4.7% of the $177 billion Fidelity Contrafund, one of the largest actively managed mutual funds in the world. The company also represented 3.3% of the $103 billion Fidelity Blue Chip Growth Fund and 2.6% of the nearly $99 billion Fidelity Growth Company Fund.

Fidelity declined to comment for this story.

Coming up aces

The extraordinary returns reflect not only the company’s growth, but also the scarcity value of access.

“They were taking a chance on Elon, and it came up aces for them,” said Greg Martin, co-founder and managing director of Rainmaker Securities. “Once they took the chance on Elon, the long-term cap table position turned out to be very scarce because the cap table is managed very tightly.” The cap table, or capitalization table, refers to a written breakdown of a company’s equity ownership.

Unlike many venture-backed companies that routinely broaden their shareholder base, SpaceX maintained tight control over who could invest, Martin said. As a result, investors who secured positions early often received opportunities to participate in later funding rounds that were unavailable to most institutions.

“Their early bet on Elon not only paid off for their initial investment, but enabled them to deploy a lot more capital when the business became more and more of an obvious success,” Martin said.

That dynamic helped transform relatively modest early investments into positions worth billions of dollars. Venture firm Founders Fund began backing SpaceX in 2008, while hedge funds such as Coatue and D1 gained exposure through later private rounds.

“Our success is almost by thinking all the things that other people do that don’t make sense, and just, hopefully, by doing those, it’s like 75% of the work,” said Philippe Laffont, founder of Coatue Management, at the Global Alts conference in New York this week.

Pensions and endowments

Pension funds and university endowments are also poised to reap substantial gains from SpaceX’s debut, underscoring how the company’s rise has rewarded institutions responsible for funding retirements, scholarships and academic research.

The Ontario Teachers’ Pension Plan invested more than $200 million in SpaceX in 2019 through a newly created technology-focused investment vehicle at the time. Back then, the pension manager described SpaceX as “a compelling investment opportunity” because of its “proven track record of technology disruption in the launch space and significant future growth potential in the satellite broadband market.”

University endowments have also emerged as major beneficiaries. Washington University in St. Louis invested roughly $50 million in SpaceX nearly a decade ago, a stake that has appreciated dramatically as the company climbed toward its IPO valuation. The holding now accounts for more than 10% of the university’s approximately $17 billion endowment, according to Bloomberg News.

Washington University declined to comment, and the Ontario Teachers’ Pension Plan didn’t respond to CNBC’s request for comment.

Correction: An earlier version misstated the allocation toward SpaceX in the Baron Asset Fund. It is 25.5%.