00:00LVEST Head of Wealth Management, Emily Green, her firm uses direct indexing as a solution for clients who want to
00:05limit exposure to specific names.
00:07Emily, thanks for joining.
00:08Thanks for having me.
00:09And look, it's a perfect day to have you on because SpaceX is joining the NASDAQ 100.
00:12How big of a conversation is this with clients who are coming to you to say, hey, I want the
00:16NASDAQ 100.
00:17Give it to me, but strip out SpaceX.
00:19Yeah, I mean, I think we know people want to own tech.
00:21And so people want what the, you know, they want to own the QQQ.
00:25They want the NASDAQ 100.
00:26I think the fear that people have is how big of it it is.
00:31And they don't really understand the concept of the float and that it's not actually going to be.
00:36You know, today it's probably like 1% that it's going to be of the NASDAQ 100 today.
00:41That's going to be a bigger and bigger conversation, I think, as the lockups come for these early investors and
00:46employees and so on and so forth.
00:48But it definitely is a controversial stock for people to own.
00:52And I think there's people who really believe in it and there's people who are really against it.
00:56Sure.
00:56Now, are you actually getting calls from people who want out because of that one stock?
01:01And are there other stocks that make people want to do that?
01:04Oh, definitely.
01:06I mean, we have, especially pre-IPO, before it went public, we had a lot of people calling us and
01:11saying, it would be interesting.
01:13They asked, how much exposure will I have?
01:15Which, it's going to change over time.
01:17It's, you know, it's as they come into the different indices and such.
01:21But we do have people who are calling us and saying, how do I make sure I don't have exposure
01:25to this or my exposure is very little?
01:27Is it a valuation exposure problem or is it, you know, an ethical moral?
01:31Because you have Palantir in there, for example.
01:33Yeah.
01:33I think it's a little of both.
01:35You know, I do, I think that Elon is very, you know, that people have big feelings about him.
01:41He's very polarizing.
01:42And so there's people who really believe in him and people who really don't.
01:45I don't know if we'd be having the same conversation if someone else was the CEO and founder of this
01:50company.
01:50Yeah.
01:51And so I think it is interesting.
01:53Well, you pointed this out to our print colleagues and we were talking about it in the break that a
01:56similar thing happened during Meta in the 2016 election.
01:59But then if you had stripped out Meta, you would have missed out on a stock that went on to
02:03reach new highs.
02:04How are you handling that conversation with your clients to say, yes, there are some concerning things governance-wise, maybe
02:10ethically, but if you strip it out, you could be losing out on gains?
02:14Yeah.
02:15You know, at Ellevest, we really think about we're going to show people what that means.
02:19And so we do a lot of direct indexing, so basically building personal index funds for people.
02:24And so you can take things out of your portfolio if you want.
02:30It is just showing them, okay, this is what it may cause.
02:33This is the tracking area that may be.
02:35This is what, are you willing to do that?
02:37And, you know, it's their money at the end of the day and trying to help them take the emotion
02:41out of that decision of, you know, SpaceX may be the name.
02:46It's what's in the news.
02:47There are also a lot of other companies, to your point.
02:49There's the Palantirs.
02:50There's a lot of things that people don't talk about every day that actually maybe do worse things.
02:54And she'll go ahead and, like, showing them the data of what that's going to mean and what that may
02:57mean from a portfolio for a good or bad perspective in the future.
03:00Because, you know, we see these big price targets for SpaceX, but we know there's a big hurdle for them
03:05to actually get into the valuation that they have today.
03:08Yeah, it's true.
03:08I mean, we're talking, Bonnie and I were talking about Morgan Stanley giving them a $300 price target and only
03:12nine of that being space.
03:14So we're in this environment where it joins the NASDAQ 100 and passive investors are buying it, whether willingly or
03:21knowingly or not, very soon after the same list.
03:24A lot of them change their rules to allow this to happen.
03:26Do you think in general for more wealth kind of retail-oriented investor that this is a problem, that they
03:32don't maybe fully realize sort of the dynamics around the stock?
03:35Yeah, I mean, I don't think people understand the changing of the rules, that it's becoming part of, like, the
03:40NASDAQ 100 so quickly, for example.
03:42You know, the S&P 500 obviously did not bend the rules, and so we're still going to see that
03:47that's not in there.
03:47And people don't understand what it's going to be in and what it's not going to be in right now.
03:52At the end of the day, you know, these indices are broad.
03:55They are, though, much more concentrated than they used to be when we look at these tech stocks.
03:59It's a different world, and I think as more float opens up and the SpaceX, you know, we see more
04:04shares available, it will be a bigger, bigger part of this.
04:08And I think it is a conversation for people to think about, especially when you look at what the valuation
04:13is at and, frankly, the profitability and the spend of that company.
04:1819 buys now, and all the price targets are above where it's trading at currently.
04:2120 buys now, and all the prices are above where it's trading at currently.
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