XOVR: Democratizing Private Equity Through SpaceX Exposure in 2025

In 2025, the line between public and private markets is blurring faster than ever. At the forefront of this shift is the ERShares Private-Public Crossover ETF (XOVR), a fund that has redefined access to high-growth private companies like SpaceX. By combining 85% exposure to the ER30TR Index—a proprietary basket of large-cap entrepreneurial stocks—with 15% in private equity, XOVR aims to democratize private market returns for retail investors. But as the fund's aggressive marketing of its SpaceX stake suggests, this innovation comes with significant risks and unanswered questions.

The Crossover Strategy: Bridging Two Worlds

XOVR's core thesis is simple: blend the liquidity of public markets with the growth potential of private equity. The ER30TR Index, which tracks 30 U.S. large-cap companies selected for their entrepreneurial traits (e.g., innovation, R&D spending, and market disruption), forms the backbone of the fund. These companies, including names like Amazon, Tesla, and Microsoft, have historically outperformed traditional indices like the S&P 500. However, XOVR's true differentiator is its private equity component.

As of early 2025, SpaceX accounts for 9.8% of XOVR's assets, held through a special-purpose vehicle (SPV) called Astra Holdings SPV Lp. This structure allows the ETF to bypass the SEC's 15% illiquid asset cap by classifying the SPV as a liquid investment. Yet, the fund's reliance on SPVs raises critical questions about transparency and valuation accuracy.

Valuation Challenges: A Double-Edged Sword

XOVR's most controversial aspect is its valuation methodology for private holdings. In late 2024, the fund marked up its SpaceX stake from $135 to $185 per share—a 37% increase in a single week—without disclosing the rationale. This adjustment, tied to a tender offer from SpaceX, was not updated for months, even as geopolitical tensions (e.g., Elon Musk's public feud with Donald Trump) and market volatility could have impacted the company's value.

Such opacity is not unique to XOVR. The broader ETF industry is grappling with how to price illiquid assets in real time. For example, the KraneShares AGIX ETF, which holds private AI firms like Anthropic, uses a Fair Value Committee to assess holdings daily. In contrast, XOVR's approach lacks similar safeguards, leaving investors in the dark about whether its SpaceX stake is overvalued, undervalued, or simply misaligned with market realities.

The risks are compounded by the SPV structure. While SPVs can reduce transaction costs and simplify access to private assets, they also introduce hidden fees (e.g., capital gains taxes, brokerage charges) and limited liquidity. If XOVR's SpaceX position were to be marked down due to a regulatory crackdown or operational setback, the fund could face a liquidity crisis as redemptions outpace inflows.

Market Positioning: A Novel Niche or a Crowded Space?

XOVR is not alone in its quest to bridge public and private markets. Competitors like the VanEck BDC Income ETF (BIZD) and Invesco Senior Loan ETF (BKLN) offer exposure to private credit and leveraged loans, while the KraneShares AGIX ETF targets AI-driven private firms. However, XOVR's focus on high-profile, high-growth companies like SpaceX sets it apart.

The fund's marketing has leaned heavily on its SpaceX stake, attracting over $300 million in inflows since December 2024. This strategy has paid off in terms of visibility but raises concerns about overhyping a single holding. For context, SpaceX's valuation in XOVR is now worth $35 million, or 11% of the ETF's total assets. If the company's value were to drop by 20%, the fund would lose nearly $7 million in a single day—a scenario that could erode investor confidence.

Regulatory and Liquidity Risks: Walking a Tightrope

XOVR's structure is a regulatory tightrope. The SEC's 1940 Act limits open-end funds to 15% illiquid assets, a threshold XOVR narrowly avoids by capping its private equity exposure at 15%. However, as the fund's assets under management (AUM) grow, maintaining this balance becomes increasingly challenging.

To mitigate this, Capital Impact Advisors has set a $500 million AUM cap, ensuring private equity exposure remains below $75 million. Yet, this limit is not binding and could be adjusted if the fund's managers prioritize growth over compliance. Additionally, the SPV's lack of transparency—its fees, redemption terms, and valuation methodology—leaves room for conflicts of interest.

Is XOVR a Compelling Innovation or a Speculative Bet?

For investors seeking exposure to the next generation of tech giants, XOVR offers a tantalizing opportunity. Its blend of public and private assets provides a diversified yet concentrated portfolio, with the potential to outperform traditional indices if its private holdings appreciate. However, the fund's success hinges on three critical factors:

1. Valuation Accuracy: Without a transparent, third-party valuation process, investors are flying blind.
2. Liquidity Management: The fund must avoid breaching the 15% illiquid asset threshold while managing redemptions.
3. Regulatory Scrutiny: The SEC's evolving stance on private equity ETFs could force XOVR to restructure its holdings.

For risk-tolerant investors, XOVR represents a bold experiment in democratizing private markets. For others, it's a speculative bet with opaque risks. The fund's performance in 2025 will depend not just on SpaceX's trajectory but on its ability to navigate the complex interplay of valuation, liquidity, and regulatory compliance.

Final Verdict: Proceed with Caution

XOVR is a compelling innovation for those who believe in the long-term potential of high-growth private companies. However, its speculative nature and valuation challenges make it unsuitable for conservative investors. If you're considering XOVR, ensure you:
- Diversify: Don't allocate more than 5-10% of your portfolio to the fund.
- Monitor Valuations: Track SpaceX's public and private valuation trends closely.
- Review Disclosures: Scrutinize the fund's prospectus for details on SPV fees and liquidity protocols.

In a rapidly evolving ETF landscape, XOVR is a testament to the power of innovation—but also a reminder that not all frontiers are safe for every investor.