Investment banks are racing to develop complex products linked to SpaceX (SPCX.US) stock, designed to shield buyers from future losses amid wild price swings following the company's market debut, according to regulatory filings.
At least five financial institutions, including Morgan Stanley and Marex Group Ltd., are seeking to offer structured notes tied to SpaceX that cap downside risk—in some cases protecting against declines of up to 50%—while also limiting potential gains over months or years. Since Elon Musk's rocket, satellite, and AI conglomerate went public in June, Wall Street has built a full ecosystem around it, spanning options to leveraged exchange-traded funds.
Where to start
Aaron Brachman, managing director at Washington Wealth Group within Steward Partners, noted that with shares tumbling more than 40% from their post-IPO peak and trading characterized by frenzy and volatility, more institutions are likely to follow suit. "As the options market for any new stock gains liquidity, other banks become more confident in pricing the associated risk," he said. "The more a stock fluctuates and captures public interest, the greater the chance it will spawn these notes."
Structured notes amid a stock crash
These products represent the latest example of Wall Street firms leveraging hot stocks to launch new offerings, many of which carry high fees. Structured notes combine fixed-income features with derivatives, functioning as debt-like securities that offer enhanced payouts compared to standard bonds. They are most commonly used by high-net-worth individuals, family offices, and discretionary managers seeking customized risk profiles in their portfolios.
Sarah Laconte, head of structured product sales for the Americas at Marex, described it as "one of the fastest rollouts of structured products linked to a new security." She added, "Demand for the underlying stock, volatility, and AI-related trades has become the norm in the structured note ecosystem."
Why just 10 ASX 200 shares?
Marex is launching a nine-month, autocallable note that returns the full principal if SpaceX shares close at or above their initial value on a predetermined date. While the note is active, investors receive a monthly interest payment of at least 1.8%, regardless of the stock's performance. At maturity, the note protects against a decline of up to 35%, but if the stock falls below that threshold, investors bear the full downside.
At Morgan Stanley, one note is designed to provide a fixed payout of 40% if SpaceX shares are flat or higher by early 2028 maturity. The same payout applies if the stock declines by less than 50%, but if the drop exceeds that level, note holders are fully exposed to the downside.
Other institutions seeking to offer structured notes linked to SpaceX include Citigroup, Wells Fargo, and RBC Capital Markets. Previously, GraniteShares filed to sell an autocallable ETF tied to the company.
Brachman of Steward Partners is skeptical of single-stock structured notes, citing what he calls a "mismatch between risk and reward." "They cap your upside on a highly volatile company, but once you breach the protection threshold, you often face unlimited downside," he said. "In that scenario, why not just buy the stock directly?"