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Fund managers are planning strategies for raising cash to grab shares of Elon Musk’s space company when they debut.

A jet painted with SpaceX logos ferried nearly 200 investors from the largest Wall Street funds from Newark, N.J., to the southern tip of Texas a week and a half ago for a multiday presentation from executives. The airplane was so full it couldn’t fit everyone who wanted to get on, said an investor on the trip.

The massive initial public offering for Elon Musk’s rocket-and-AI company, still more than a month away, has investors debating what to sell to make room for SpaceX shares. While they think about data centers in space, model a potential $1.5 trillion valuation and gawk at SpaceX’s enormous financial losses after it bought xAI, they are also making plans to raise cash to buy into the offering. Investors at some of the world’s largest mutual funds have said they are considering trimming stakes in other tech stocks to free up cash to buy SpaceX shares.

Some investors say the most likely stocks to sell are the Magnificent 7—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The group struggled this year but several of the stocks have rebounded strongly. The Bloomberg Magnificent 7 Total Return Index, an equity benchmark that tracks the stocks, rose 14% in April and is up 2% this year, while the broader S&P 500 is up 5.4%, bolstered by strong gains in energy and industrial sectors.

SpaceX would likely enter the public markets as one of the top 10 most valuable companies in the world, creating a cascade of proactive decisions for fund managers. First they need to decide how much of SpaceX they want, and then how much they think they will be able to buy in the offering. Whatever the number, they’ll need to use their available cash or sell stocks to raise the cash. Finally, they’ll need to balance their portfolios once the new stock is added.

The decision about what to sell is significant: Nearly all of the largest tech stocks print mounds of cash, with steady growth trajectories. SpaceX, meanwhile, amassed a $4.9 billion net loss and burned cash last year, with its growth tied largely to developing the world’s most powerful rocket—a project that isn’t yet commercially viable.

T. Rowe Price’s Tony Wang, who runs the mutual fund giant’s $12 billion science and technology fund, said he thinks about the choice of what to buy and sell in the SpaceX IPO “in the context of the Mag 7” and “what has the biggest risk-adjusted return.”

Wang, whose largest holdings are Apple, Nvidia and Broadcom, didn’t want to show his cards on what he’ll buy and sell in the coming weeks. But he said other managers would likely cut from large companies like those because they are so liquid.

Other managers have also discussed trimming small stakes in industries SpaceX directly competes with, such as traditional aerospace and defense names, according to some of them. They say selling of tech stocks could be limited, insulating the market from a big downturn.

Another reason for portfolio managers to trim Magnificent 7 stocks to buy SpaceX is rules about how concentrated funds are in specific sectors. Tech stocks account for about two-thirds of the holdings of large-company growth funds, for example, and SpaceX would push that number higher. Some funds will have to choose which existing holding to sell down if they want to add SpaceX. Potential early entry by SpaceX into major stock indexes means that index funds, and the funds that closely track the indexes, will also be buying the stock and might have to adjust their holdings of other stocks.

Fund managers that are seeing new money come in from investors will have an easier time accumulating cash to buy SpaceX. But investors have been shunning actively managed funds and instead pouring cash into index funds, which won’t buy SpaceX until it is admitted into the indexes they track. Active managers of funds that are losing assets are already selling stock to meet investor redemptions. If they want to buy SpaceX, they’ll be under even more pressure to sell.

And then there’s the overlap between Musk’s other company, Tesla, which is owned heavily by both retail investors and Wall Street funds. Ross Gerber, who manages a $4 billion fund at Gerber Kawasaki Wealth & Investment Management, said the SpaceX IPO would cause people to sell their Tesla stock. Shares in Musk’s electric vehicle company have already fallen 11% this year due to disappointment over EV sales.

“Many of the Tesla investors want to own SpaceX, and they’re going to sell their Tesla stock or some of their Tesla stock to buy SpaceX,” Gerber said on The Information’s TITV last month.

Such sales aren’t likely to happen until a couple weeks before the IPO. A Goldman Sachs report last week said U.S. mutual funds have held more of their money in cash ahead of major IPOs in the past, but they hadn’t done so yet this year. But the bank cautioned that large IPOs don’t usually affect the performance of big company stocks.

Another criteria for selling is tax-loss harvesting, where funds sell their losers to offset gains for tax purposes. Big tech stocks that have fallen recently, such as Microsoft, would be prime targets for selling. Stock in the software giant has fallen about 25% since an October high.

Strong demand from public market investors could benefit existing SpaceX shareholders, who are expected to get some early opportunities to sell shares, ahead of a typical six-month lockup period, although it is not clear when and how much investors will be allowed to sell.

Gerber added in an email that he already owns some SpaceX shares and plans to sell some as soon as he is allowed after the IPO. He thinks the company should be valued lower than its current $1.25 trillion private valuation. “I’ll let the market figure that out. For now I’d love to get out some of the money that I have in SpaceX that’s been locked up for five years or so,” he said.