Ron Baron’s SpaceX ETF Bet Gets Diluted

A week ago, I wrote about how the Baron First Principles ETF (RONB) had become the ETF with the largest exposure to private companies.

At the time, the fund had 21.5% of its $93 million portfolio allocated to SpaceX, along with another 5.4% invested in xAI, for a combined private market exposure of nearly 27%.

That allocation pushed beyond the SEC’s 15% limit on illiquid securities for open-end funds. RONB exceeded that threshold by classifying its SpaceX stake as “less liquid,” rather than “illiquid,” based on the depth of secondary-market trading in the shares.

At the time, I speculated that the fund could see a surge of inflows as investors sought exposure to SpaceX ahead of a potential IPO expected later this year.

“Surge” may be too strong a word, but inflows have been solid. Over the past week, RONB’s assets have climbed roughly 50%, from $93 million to about $139 million.

The issue is that as those inflows arrived, the fund was not immediately able to scale up its positions in its private holdings. As a result, existing investors saw their effective ownership in those companies diluted.

A week ago, RONB’s SpaceX stake totaled roughly $20 million, representing 21.5% of assets. Today, the dollar value of that position is largely unchanged, but it now represents just 14.4% of the fund’s larger asset base.

The same dynamic played out with xAI. The fund’s roughly $5 million position fell from 5.4% of assets to 3.6%.

This is a real-world example of one of the structural risks associated with ETFs that hold meaningful private-market exposure. As I wrote previously, “If the fund experiences rapid inflows, managers may not be able to scale private positions immediately. New capital could flow into public holdings instead, reducing the ETF’s effective private exposure.”

That appears to be exactly what happened here.

This does not mean RONB won’t be able to rebuild its SpaceX weighting over time. If SpaceX is truly “less liquid,” rather than illiquid, the fund should eventually be able to source additional shares.

There is precedent. The ERShares Private-Public Crossover ETF (XOVR), which also has substantial SpaceX exposure, was able to increase its weighting even as assets surged late last year.

At the end of the third quarter, XOVR held roughly $486 million in assets, with SpaceX accounting for about 7% of the portfolio. By the end of the fourth quarter of 2025, assets had grown to nearly $1.5 billion, while SpaceX exposure increased to 10.9%.

However, one key difference is structure. XOVR gains exposure to SpaceX indirectly through a special purpose vehicle, while RONB owns shares directly. That distinction may matter when it comes to sourcing additional exposure, particularly as IPO expectations firm up.

SpaceX was last valued at roughly $800 billion in a secondary transaction late last year. Market speculation has since pointed to a potential IPO valuation of $1 trillion or more.

If expectations for a blockbuster IPO continue to build, existing shareholders may be less willing to sell in the secondary market, making it harder for ETFs like RONB to scale exposure quickly.

More broadly, this episode highlights a structural constraint that applies even more forcefully to truly illiquid private companies. As ETFs attract inflows, position sizes in private holdings can shrink mechanically.

That dilution effect may ultimately be what caps private market exposure in ETFs, even as issuers look to satisfy strong investor appetite for access to high-profile private companies.