Scottish Mortgage Investment Trust PLC (LSE:SMT) and other FTSE tech funds fell sharply on Tuesday after a sharp decline in SpaceX and other big tech shares overnight.
It came as SpaceX looked to tap the bond market for the first time, looking to borrow up to $20 billion with an investment-grade bond.
SpaceX shares fell 16.4% to $154.6 overnight, extending a retreat that began after an explosive start to trading following the company's record $1.3 trillion initial public offering this month.
The shares were issued at $135 and surged to almost $225 within their first three days of trading. But by the end of their first full week on the market they had slipped to just under $185 before Monday night's sell-off.
Scottish Mortgage is one of the largest outside investors in SpaceX, with the holding accounting for 17.9% of its portfolio at the end of April. The position was its largest investment by some distance, although the weighting had been trimmed from 19.3% a month earlier.
Scottish Mortgage first invested in SpaceX in December 2018 and, after adding to the position over subsequent years, recorded a paper value of close to £3 billion before the rocket company's stock market debut.
Other investors in SpaceX also came under pressure, with Polar Capital Technology Trust PLC (LSE:PCT) and Baillie Gifford US Growth Trust PLC, both falling 3.1%. Last week the Polar Cap trust disclosed that it had subscribed for shares in the SpaceX IPO, although it did not reveal the size of its investment.
Issuing investment-grade bonds is "quite unusual for a company that is burning cash", said Ipek Ozkardeskaya, senior analyst at Swissquote.
"Seemingly, the recent IPO did not suffice to assuage the company's funding needs — a reminder of how much money may still be burned on the way to Mars."
Analyst Sofie Liv Petry at Danske Bank said: "it is remarkable to see a company of that size display this degree of volatility so early in its listed life. With SpaceX soon to enter Nasdaq indices under the new fast-entry rules, this will inevitably raise questions about index inclusion mechanics."
The weakness in SpaceX came amid a broader sell-off in US technology stocks, sending the Nasdaq Composite down 1.3%.
Alphabet dropped more than 5% amid concerns over departures from its artificial intelligence division. Amazon and Broadcom each fell about 4.7%, Microsoft lost 3.2% and Meta Platforms declined 2.3%.
Among the biggest fallers on the Nasdaq 100, Arm Holdings and Palantir Technologies dropped 7%, while Netflix fell 5.8%.
** UPDATE: Adds details, analyst comments **
