You Can Now Buy Private Companies Like SpaceX and OpenAI On the Stock Market — With A Catch - The Average Joe


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    You Can Now Buy Private Companies Like SpaceX and OpenAI On the Stock Market — With A Catch

    Noah Weidner

    March 28, 2024

    SpaceX — the company that monopolized the space market (barring any extraterrestrial conglomerates) — was rumored to be raising a funding round in December that would value Elon Musk’s spacefaring startup at over $175B. That would make it the world’s second most valuable private company, alongside S&P 500 stars like Intel ($INTC), Uber ($UBER), and American Express ($AXP).

    Beyond launching satellites and astronauts into orbit, SpaceX is developing its satellite internet network and building a rocket to go to Mars. And who wouldn’t want to invest in that? But as a public market investor, getting your hands on shares in this rapidly growing space enterprise is nearly impossible. Not anymore.

    Startup stock: Last week, the Destiny Tech100 ($DXYZ) debuted as the first publicly listed US fund dedicated to holding private companies. This exposes investors to America’s most valuable private firms, including SpaceX, which makes up 35% of its holdings.

    • In its initial two trading days, the ETF surged over 177% due to skyrocketing demand.
    • Besides SpaceX, the fund includes 22 other companies in its portfolio — with plans to expand to over 100 companies.

    Private-to-public pipeline

    Dozens of global private companies are also in the fund, including Epic Games, Chime, and Stripe, which are all reportedly considering going public in 2024 or 2025.

    • Other familiar names include Axiom Space (9.7%), Boom Supersonic (4.6%), and OpenAI (3.8%).
    • Unlike mainstream ETFs like the Vanguard S&P 500 ETF, this fund is actively managed and comes with a steep 2.5% annual management fee.

    But there’s a catch… The fund may sometimes trade at a premium, potentially resulting in investors paying more than the startup’s actual value. Between May 12, 2022, and Dec. 31, 2023, Destiny’s net asset value fell 23%, coinciding with a sharp drop in startup valuations. While SpaceX’s values rose by nearly 30%, the values of its Stripe and Epic Games holdings dropped over 60%. If startup funding difficulties persist, investors in Destiny might feel the pinch (regardless of whether it’s reflected in $DXYZ’s price), even if SpaceX powers on.

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