ETF Innovators Target the Next Big AI IPO

Nicole Petolides (0:00)

Welcome back to The Watchlist. I'm Nicole Petolides. We're live on the floor of the New York Stock Exchange. It's time for our ETF Watchlist. Joining me right now, Will Rhind is here, CEO of GraniteShares. I'm so glad you are with us. So we think about ETFs, the growing demand, the record last year, the record this year. Why are folks still trying to get into these ETFs, particularly to have access to private companies that are coming public? That's somewhat of a new trend.

Will Rhind (0:28)

I think to some degree, our job is to try and furnish that demand from investors with the supply of products. Right now, AI has been a massive trend, as we know, over the last few years.

The latest thing that's happening really in ETF land is that these IPOs that are coming to market, whether they be in the AI space or others are ones that investors want to get access to. Obviously, in the case of leveraged ETFs, investors are looking to trade, both on the long side and the short side.

Nicole Petolides (1:01)

Yeah, and I want to talk about that and sort of give out, heed the warning too for the folks that may not be ready for that kind of trade, but something like SpaceX, for example, right? A lot of people had some access before it actually came to markets. How did that work out when you think about the ETF, how the stock launched, the lockup periods?

How did you see SpaceX? How did that work out or lessons learned?

Will Rhind (1:26)

Yeah, so SpaceX was really, I suppose, the most high-profile test case for this, because normally when we're launching a product, we're launching a product on a stock that is already trading, or it's a basket of stocks that everybody knows in terms of thematic exposure or sector. So when SpaceX came to market, it was the first mega IPO where we could offer a 2X long and a 2X short just after the listing.

So with those two tickers, we could see how investors traded around that IPO. As you rightly point out, what was unique about SpaceX was you had a lot of stock that was locked up. So people had no way to sell, they had no way to hedge their positions. So we had our short, 2x short, SNK, actually became bigger or larger than the 2x long SPAL, because I think there was more demand from investors looking to hedge their positions because shares were locked up.

Nicole Petolides (2:24)

Because they couldn't sell. It had a pop, it had a drop, it was 135 IPO, went to 225, dropped to 104, and today here at 167 So let's fast forward to Anthropic, and you have a couple of options here, AIL, ANS, Leveraged ETFs. So two times, so people fully understand.

But, and they're not the only ones out there for Anthropic, but this is GraniteShares way of offering a suite of Leveraged ETFs for Anthropic, right? Tell me more about it.

Will Rhind (2:52)

Yeah, so after SpaceX, we saw Hynex. So SK Hynex was another massive one that people wanted to get exposure to. And we launched ETFs on that. They were hugely successful. We have the largest market position in those. And so Anthropic, we believe, is going to be another mega IPO, of course. And investors are asking us for trading tools to enable them to trade around the IPO and obviously after the IPO. So AI long or AIL is the 2X long Anthropic and ANS or Anthropic short is the 2X short. It would be interesting to see, again, if these products come to market and we have to say that these are in registration currently, so these are not effective, meaning people can't buy them today.

But when the Anthropic IPO happens, it would be interesting to see whether we see a repeat of the SpaceX pattern or something different.

Nicole Petolides (3:49)

Right. So in the SpaceX pattern, more people were in the shore because they were trying to cover because they couldn't sell. I think about here now, how long do these, if someone's in these ETFs, do these stay on while this trades for the year ahead, for the two years ahead? I mean, do they continue to go on?

Will Rhind (4:07)

I think it depends really on the investor. I would say overwhelmingly, people are trading these products for short term. So let's for argument's sake say, just to keep the numbers simple, we have around 10 billion in these products on a given day.

We might see 2 to 3 billion trade every single day. And so that tells you that if about a third of the book is turning over every day, that the majority of people are using these for short term exposure.