SpaceX’s valuation has soared, yet ERShares Private-Public Crossover ETF’s investors have seen little benefit.
- ERShares Private-Public Crossover ETF XOVR invests in a mix of common stocks and private equity, principally SpaceX
- XOVR has performed poorly since initiating its SpaceX position in December 2024, losing 4.6% per year
- Its public stock holdings have lost money even as US stock market indexes have risen, and its private equity stake has contributed minimally to performance, despite SpaceX’s valuation rising dramatically higher
- The manager’s accounting and valuation of the SpaceX stake raises concern, as does the position’s large size: It recently leapt to 21.5% of net assets, a risky concentration in an illiquid asset
- These issues impart useful lessons, especially as more firms prepare to offer “crossover” products like XOVR to retail investors
I last wrote about ERShares Private-Public Crossover ETF a year ago. It’s an exchange-traded fund that invests primarily in public equities but then tries to spice things up with stakes in a handful of private equity names. The ETF’s main private equity position has been SpaceX, which it accesses via a special-purpose vehicle.
In last year’s piece, I laid out a troubling pattern in which XOVR’s manager, Capital Impact Advisors, repeatedly hyped the SpaceX stake while disclosing little of substance about the position, including the ownership terms, its approach to valuing it, or how it was managing the associated liquidity risk. I warned that this could have ramifications for investors.
In the time since, SpaceX’s value has gone parabolic as investors await its hotly anticipated IPO. And XOVR has continued to hold a large SpaceX position, averaging around 9% of net assets since Dec. 2024. That large stake, in turn, has attracted investors in droves: XOVR’s assets ballooned over $1 billion amid frenzied demand for SpaceX and scarce supply.
Given this, you’d think XOVR would have done well for itself. But that’s not been the case: As of Feb. 20, 2026, XOVR had lost 4.6% per year since Dec. 3, 2024, which is when the manager announced it had initiated the SpaceX SPV stake. By contrast, the Nasdaq 100 and S&P 500 indexes rose 15.5% and 13.0% per year, respectively, over that span.
What went wrong? Things I lacked the foresight to warn about in my article a year ago.
Dismal Public Stock Performance
Though I’ve focused on XOVR’s private equity sleeve, the ETF spreads most of its assets across 30 or so public stocks that are “informed by and aligned to” an entrepreneurship index the manager developed (“ER30TR Index”). Those stocks have done poorly.
In fact, it appears they’ve even badly lagged their own index, which I’ve written about elsewhere. As of Dec. 31, 2025, which is the most recent data we have to work from, the ETF’s trailing one-year return fell more than 340 basis points shy of the index’s, a margin too wide to be explained by fees and lackluster performance from the private equity sleeve (more on that shortly).
Dormant Private Sleeve
As mentioned, the manager initiated its SpaceX SPV position on Dec. 3, 2024. It marked it up from $135 per share to $185 per share a week later. And then … crickets. It carried the stake at $185 per share until Dec. 30, 2025, at which point it stopped reporting a carrying value altogether.
I’ve attempted to reconstruct XOVR’s reported daily returns and found that its public stock holdings seemed to account for nearly all its performance. Meaning the privately held names—principally SpaceX—contributed minimally to performance, despite SpaceX’s fast-rising valuation.
Curiously, it doesn’t even appear that XOVR realized a material gain when the manager briefly sold its stake in the SpaceX SPV late last year. To illustrate, the ETF’s most recent semiannual report contains the following disclosure, which reconciles the portfolio’s starting and ending balance in private equity investments.
XOVR entered that six-month period with a $33.8 million SpaceX SPV stake (which is impounded in the $38.8 million “Beginning Balance” shown above). Based on holdings data reported to Morningstar, XOVR maintained that position until Dec. 29, 2025, when it disappeared. Presumably, that was the date the manager sold it for $36.4 million (“Sales”), netting a roughly $2.6 million gain, which amounted to around 0.2% of net assets that day.
That was a remarkably small profit when you consider the manager had repeatedly indicated it was carrying the position it sold at a $185 per share value.
ERShares also recently increased its SpaceX position at $185 per share—matching its previous entries—to reaffirm confidence in the company’s valuation amid market speculation.
ERShares press release "XOVR ETF Adds Anduril, Joining SpaceX to Offer Pre-IPO Access" dated June 6, 2025
What’s more, SpaceX’s valuation had streaked higher over that six-month period, as shown in this timeline of SpaceX’s estimated valuation from our affiliate, PitchBook.
If XOVR entered this period holding a $33.8 million stake in a SpaceX SPV valued at $185 per share and SpaceX’s valuation rose dramatically in the time leading up to the sale, the manager should have been able to sell the position for far more than $36.4 million.
Adding to the confusion, it appears XOVR reinstated its SpaceX SPV stake a day after this sale, but this time at a far higher amount: $161.5 million (“Purchases” in the reconciliation table above). That figure exactly matched the value of a different position that up to that day had been labeled “US Dollars,” as shown in the holdings time-lapse below.
As mentioned, the ETF’s manager stopped reporting a carrying value per share on Dec. 30, 2025, which coincided with this purchase. It’s therefore not possible to determine the implied price it paid for SpaceX in re-establishing the $161.5 million SpaceX SPV position or to compare that purchase price with the price at which it sold its stake the day before.
The Markup That Wasn’t
Subsequent to this episode, on Feb. 9, 2026, the ETF’s manager announced it was revaluing XOVR’s SpaceX stake to $526.59 per share. That should have been good news: The $526.59 mark is nearly triple the $185 per share value XOVR was most recently carrying SpaceX at.
Yet it doesn’t appear to have benefited XOVR shareholders: While the ETF gained that day, it was far less than one would expect if even a portion of a 9.3% position was revalued to that extent. In fact, I found the ETF’s public equity sleeve explained nearly all its return that day, with the average stock climbing more than 3%.
How could that be? We don’t know, but the manager’s Feb. 9 “transparency reset” announcement states it had restructured the way the ETF was accessing SpaceX shares to “more directly reflect observable company developments over time rather than legacy structural effects.”
Asked to comment, an ERShares representative stated, “XOVR’s SpaceX exposure is held through SPV structures, and the position’s carrying value has been determined pursuant to the fund’s valuation procedures applying the requirements of generally accepted accounting principles as applicable to investment companies. These include application of available inputs such as reported valuations by SPVs and observable events regarding such investments and underlying investment holdings thereof.”
Absent further clarification, it leads one to conclude the former arrangement prevented the manager from marking the position to market in a way that more fully accrued to XOVR’s benefit, perhaps on account of onerous fees, dilutive ownership terms, or other factors.
Lessons
I’ve spent extensive time cataloging the issues at this ETF and warning about unintended consequences. For all the problems here, though, I do think it imparts some useful lessons, especially as more firms prepare to offer “crossover” products like XOVR to retail investors. Among those lessons:
Be leery of managers who promote funds by hyping an individual holding.
One of the things that originally caught my eye about XOVR was the manager’s unabashed marketing of the ETF based on its SpaceX position.
I found it questionable because of the way it can warp a manager’s incentives and priorities. For instance, instead of making the best possible balance of risk and reward the top priority, the manager might place undue emphasis on gaining enough exposure to SpaceX to allow for it to remain a key selling point, irrespective of the trade-offs involved.
With illiquid assets, “enough” can become “too much” in a hurry.
For most of 2025, XOVR’s SpaceX stake ranged from 6% to 10% of net assets. Then, in December, the ETF saw a torrent of inflows from investors drawn by the SpaceX position. Since that position was effectively fixed in dollar value at the time, the influx of assets meant it shrank dramatically as a percentage weight in just a matter of weeks.
In response, the manager sunk an additional $128 million into the SpaceX SPV in late December 2025, which pushed the stake back above 10%. It hovered there until Feb. 9, when the manager added another $77 million, lifting it above 13%. Judging from the press release issued at the time, this apparently advanced the manager’s goal of obtaining more than $200 million in SpaceX exposure.
However, in the days since, XOVR has seen nearly $630 million in net outflows, which, coupled with losses from the portfolio’s public stock holdings, further magnified the SpaceX position. As of Feb. 20, 2026, it had climbed above 21% of net assets.
The point is this: The line between manageable and unmanageable is very thin when you’re stuffing hard-to-trade assets into daily-liquidity vehicles like ETFs, a reality XOVR’s manager appears to be reckoning with in real time.
Investors intrigued by gaining access to private equity from the convenience of a brokerage account are well advised to keep this in mind.
Buying on scarcity is like the dog that catches the car.
The only plausible explanation for investors piling into XOVR is the SpaceX access it purported to offer. After all, before XOVR took the SpaceX stake, it was an obscure ETF with a pedestrian record.
Investors who wanted a piece of the SpaceX action have gotten more than they bargained for: Losses from the portfolio’s public-stock sleeve and bupkis from the SpaceX position. Woe to those who bought in thinking a markup from the $185 per share carrying value was imminent. It appears those plans have been undone by nosebleed SPV fees and dilution.
It’s another reminder that when it comes to investing, the more you covet something, the more you should probably question your desire to own it in the first place.
Substance matters, but so does structure.
The best thing one can say for XOVR’s manager is it had the foresight to promote the ETF based on SpaceX’s improving prospects. SpaceX’s valuation has indeed taken off since XOVR entered the position in Dec. 2024. In that sense, the investment thesis was correct.
The problem is structure: The SPVs the ETF utilized to obtain SpaceX shares were apparently so costly or dilutive that XOVR has almost nothing to show for making the correct call on the valuation.
ETF investors really haven’t needed to concern themselves with how their capital reached its destination. Public equities are accessible and abundant, and so it has almost always been a simple matter of the ETF allocating to those stocks as part of a transparent and straightforward arrangement.
While private investing need not be convoluted—for instance, there are some funds like Baron Partners Fund that invest directly in SpaceX shares—it can be, as XOVR vividly demonstrates. If you hear terms like “special purpose vehicle” used to describe the private position concerned, it behooves you to dig deeper to understand that investment’s terms, assessing the adequacy of the manager’s disclosure as you go.
Make no mistake: The onus should be on the manager to clearly lay out the risks and rewards. Had XOVR’s managers done so, it’s possible investors would have come to appreciate all the strings attached to its SpaceX stake.
If a manager can’t be straight with you, it’s probably best to look elsewhere. And XOVR’s manager has had trouble keeping its own story straight, let alone clearly explaining how it’s managing and valuing the ETF’s private investments.
XOVR’s disclosure and reporting practices have been poor. It took the firm more than four months to even disclose the risks of SPVs. This only after the manager took to social media to celebrate its early markup of the SpaceX SPV position, misleadingly describing it as a “stock” investment.
The manager also publicly pledged to cap XOVR’s net assets at $500 million, something that isn’t possible to do with an ETF without its price decoupling from net asset value. Asked about this, the manager claimed the firm had misspoken, saying it meant to suggest XOVR would stop purchasing more private equity when it reached $500 million in net assets. But, as mentioned, XOVR recently bought even more exposure to SpaceX, far above that level.
The firm’s approach to explaining how it values its SpaceX position has also been lacking. Though it boasted of “industry best practices in valuation methodologies for private equity investments,” it has marked the SpaceX position only three times: once when XOVR initially took its stake, once a week later when it marked it up, and finally on Feb. 9 of this year as part of the “transparency reset” it declared.
Moreover, the firm seemingly took steps to obscure how it was valuing its SpaceX SPV investment late last year when it stopped reporting the share count. The firm disclosed it had discontinued this reporting because SPVs lack a unit count or quoted share price. Yet that didn’t seem to stop the manager from referring to the SPV’s carrying value on prior occasions, or from citing a carrying value in its Feb. 9 announcement.
Lastly, there’s the question of why XOVR didn’t bag a larger profit from the apparent sale of the SpaceX SPV stake on Dec. 29, 2025, or why its markup to $526.59 per share on Feb. 9, 2026, didn’t appear to confer material gains to XOVR shareholders. The manager could address those questions by disclosing the economic substance of its SpaceX SPV investment over time.
Until it does so, investors will be left to wonder why they don’t appear to have more fully participated in SpaceX’s gains over the life of XOVR’s SpaceX SPV investment.
Switched On
Here are other things I’m writing, reading, watching, or listening to:
- Morningstar’s “Guide to Defined Outcome ETFs”
- The new “Active/Passive Barometer” report is out, and the results for active funds are … not great
- “Evergreen Funds: We Have Questions” by PitchBook’s Hilary Wiek (Related: Tim McGlinn of TheAltView on the “cynical secondary circle of life”)
- Tom Brakke’s biweekly tour de force of the investing world
- Animal Spirits on markets and which is the best national park: “All of them. Just love America.”
- You betcha’: Filing to register ETFs that will invest in “event contracts” tied to control of the presidency, House, and Senate
- Ben Thompson (Stratechery) on whether it’s curtains for software
- The Besnard Lakes “Devastation”
- “Apollo 11″
Don’t Be a Stranger
I love hearing from you. Have some feedback? An angle for an article? Email me at [email protected]. If you’re so inclined, you can also follow me on Twitter/X at @syouth1, and I do some odds-and-ends writing on a Substack called Basis Pointing.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.