Subversive ETFs has submitted filings to the Securities and Exchange Commission (SEC) to launch two exchange-traded funds (ETFs) aiming to exclude companies associated with Elon Musk. These funds, designated as QQNE and SPNE, will focus on the Nasdaq-100 and S&P 500 indices, respectively, while omitting Tesla and SpaceX from their portfolios.

The Nasdaq-100 Ex-Elon Enterprises ETF (QQNE) will track the performance of the Nasdaq-100 index minus Tesla and SpaceX. Meanwhile, the S&P 500 Ex-Elon Enterprises ETF (SPNE) will similarly track the S&P 500 excluding only Tesla. Fund managers have the discretion to remove additional Musk-related ventures, such as Neuralink or The Boring Company, if they become publicly traded.

ETF Details and Structure

Each ETF will maintain at least 80% of its assets in the respective indices, redistributing the market cap weight of excluded companies among the remaining stocks. Notably, SpaceX's recent addition to the Nasdaq-100, permitted under new Nasdaq rules, allows it to enter without displacing another stock, while Tesla has been part of the S&P 500 since 2013.

However, due to the S&P 500 eligibility rules, SpaceX is not anticipated to join that index for at least another year, making SPNE essentially mirror the full S&P 500 minus only Tesla.

Investor Sentiments and Concerns

Investor interest in distancing from Musk-linked companies may stem from various factors. Some investors have expressed concern over Musk's political activities, particularly his role in the now-dissolved Department of Government Efficiency. Others are questioning SpaceX’s valuation, estimated at around $2 trillion. Emily Green, who manages wealth at Ellevest, noted that many investors prefer to dissociate from Tesla and Musk, highlighting worries over Musk's significant influence over SpaceX.

Despite these sentiments, skepticism surrounds the potential success of these new ETFs. Dave Nadig, president of ETF.com, labeled the funds a “gimmick” and expressed doubts about their ability to attract substantial assets. He drew parallels with the Inverse Jim Cramer ETF, which was discontinued shortly after its launch due to low demand. Additionally, finance professor Jia Hao from Babson College warned that exclusion of these companies might lead to tracking errors, potentially causing investors to miss out on gains if those companies outperform.

This material is informational and should not be considered financial advice.