Wall Street Races to Launch Space X-Linked Products as Shares Swing Sharply
As SpaceX shares have fallen sharply, Wall Street is accelerating the launch of complex investment products linked to the stock. The products are marketed as ways for investors to limit the risk of further declines. Regulatory filings show that at least five financial institutions, including Morgan Stanley and Marex Group Ltd., are seeking to issue structured notes linked to SpaceX shares. These products can limit investors’ downside. Some offer protection against declines of up to 50%, but they also cap the gains investors can receive if the stock rises over the coming months or years. Since SpaceX’s IPO in June, Wall Street has built a full investment ecosystem around the company, including options and leveraged ETFs. With SpaceX shares trading actively and experiencing sharp price swings as they decline, more financial institutions are expected to follow with similar products. Aaron Brachman, executive managing director of Washington Wealth Group at Steward Partners, said: “As liquidity in the options market for any newly listed stock continues to increase, other banks are more likely to be willing to price the associated risks.” “The more volatile a stock is, and the more public attention it attracts, the more likely it is that structured notes linked to it will emerge.” The products are the latest example of Wall Street developing new investment tools around popular stocks, and many carry high fees. Structured notes combine features of fixed-income products and derivatives. In essence, they are bond-like securities that can offer potentially higher returns than ordinary bonds. They are typically favored by high-net-worth individuals, family offices and asset managers seeking customized risk allocations. Sarah Laconte, head of structured-product sales in the United States at Marex, said: “These are among the fastest-launched examples of structured products linked to a newly listed security. Demand for equity-linked investments, volatility trading and artificial-intelligence-related opportunities has become widespread in the structured-notes market.” Marex has launched a nine-month note that will be automatically redeemed and return the full principal if SpaceX’s stock closes at or above its initial price on a preset date. Regardless of how the shares perform during the life of the note, investors will receive at least 1.8% in interest each month. At maturity, the product can provide investors with protection against losses of up to 35%. If SpaceX shares fall by more than that amount, however, investors will bear the entire loss. A related Morgan Stanley note is designed to pay a fixed 40% return as long as SpaceX shares are unchanged or higher at maturity in early 2028. Investors would still receive that return if the stock’s decline were less than 50%; if the decline exceeded 50%, noteholders would be fully exposed to the downside. Other institutions seeking to launch SpaceX-linked structured notes include Citigroup, Wells Fargo and RBC Capital Markets. GraniteShares previously filed an application to launch an automatically redeemable ETF linked to SpaceX. Brachman of Steward Partners, however, is not bullish on single-stock structured notes. He said the products have what he called an “inversion of risk and reward.” “They limit the upside of highly volatile companies, but once the protection threshold is breached, they often leave investors facing unlimited downside risk—in that case, why not just buy the stock directly?”
Regulatory filings show that at least five financial institutions, including Morgan Stanley and Marex Group Ltd., are seeking to issue structured notes linked to SpaceX shares.
These products can limit investors’ downside. Some offer protection against declines of up to 50%, but they also cap the gains investors can receive if the stock rises over the coming months or years.
Since SpaceX’s IPO in June, Wall Street has built a full investment ecosystem around the company, including options and leveraged ETFs. With SpaceX shares trading actively and experiencing sharp price swings as they decline, more financial institutions are expected to follow with similar products.
Aaron Brachman, executive managing director of Washington Wealth Group at Steward Partners, said: “As liquidity in the options market for any newly listed stock continues to increase, other banks are more likely to be willing to price the associated risks.”
“The more volatile a stock is, and the more public attention it attracts, the more likely it is that structured notes linked to it will emerge.”
The products are the latest example of Wall Street developing new investment tools around popular stocks, and many carry high fees.
Structured notes combine features of fixed-income products and derivatives. In essence, they are bond-like securities that can offer potentially higher returns than ordinary bonds. They are typically favored by high-net-worth individuals, family offices and asset managers seeking customized risk allocations.
Sarah Laconte, head of structured-product sales in the United States at Marex, said: “These are among the fastest-launched examples of structured products linked to a newly listed security. Demand for equity-linked investments, volatility trading and artificial-intelligence-related opportunities has become widespread in the structured-notes market.”
Marex has launched a nine-month note that will be automatically redeemed and return the full principal if SpaceX’s stock closes at or above its initial price on a preset date. Regardless of how the shares perform during the life of the note, investors will receive at least 1.8% in interest each month.
At maturity, the product can provide investors with protection against losses of up to 35%. If SpaceX shares fall by more than that amount, however, investors will bear the entire loss.
A related Morgan Stanley note is designed to pay a fixed 40% return as long as SpaceX shares are unchanged or higher at maturity in early 2028. Investors would still receive that return if the stock’s decline were less than 50%; if the decline exceeded 50%, noteholders would be fully exposed to the downside.
Other institutions seeking to launch SpaceX-linked structured notes include Citigroup, Wells Fargo and RBC Capital Markets. GraniteShares previously filed an application to launch an automatically redeemable ETF linked to SpaceX.
Brachman of Steward Partners, however, is not bullish on single-stock structured notes. He said the products have what he called an “inversion of risk and reward.”
“They limit the upside of highly volatile companies, but once the protection threshold is breached, they often leave investors facing unlimited downside risk—in that case, why not just buy the stock directly?”