SpaceX - Investment New Frontier ! Invest now ?
Not a clickbait.
If you have clicked to read this post because of SpaceX, you have come to the “right” place.
What I am going to share will “blow” your minds off.
Without further ado, let’s jump in.
Intro.
Some of today’s hottest companies have remained off-limits to investors. For example:
Stripe. Valued at $65 billion as of February 2024.
SpaceX. Estimated to be worth $175 billion.
Assuming these valuations are accurate, that puts:
Stripe at a level higher than $Spotify Technology S.A.(SPOT)$,
Nintendo & SpaceX in the same neighborhood as $IBM(IBM)$ & $Intuit(INTU)$.
Investment Restrictions.
Reasons why these companies are “off limits” is because ordinary individual investors are not able to invest in startups except “accredited” ones.
Based on SEC guidelines, this refers to:
People with a net worth of $1 million.
People with an annual income of $200,000 for the past 2 years..
New Kids On The Block
New Kids On The Block.
All “roadblocks” to safeguard & protect retail investors have been mitigated by a new funds - $Destiny Tech100 Inc(DXYZ)$, a publicly traded fund that contains shares of 23 private tech companies, with plans to expand to 100 start-ups eventually.
It was officially launched on 26 March 2024 in NYSE exchange: with an IPO price of $9.00.
The fund is managed by company Destiny XYZ Inc., a closed-end management investment company that invests in a portfolio of private technology companies.
Destiny XYZ, CEO, Sohail Prasad has said: “D/XYZ (the company) through its product Destiny Tech100 — is on a mission to make investing in innovative private companies accessible to all“.
Company’s Backers.
Backers extracted from company’s FAQ, is almost a list of who’s who.
Founders of Dropbox.
Founders of Coinbase - Fred Ehrsam.
Founder of Quora - Charlie Cheever.
Sequoia Capital - current & former Partners.
Greylock Partners.
Y Combinator.
Musician - NAS.
Soccer star - Keisuke Honda.
Founder of FIGS (medical apparel supplier) - Heather Hasson.
Companies in Fund’s Holdings:
SpaceX. It is the biggest part of the current portfolio, making up 34.6% of the fund.
Axiom Space is 2nd, making up 9.7% of holdings.
Epic Games is 3rd, at 4% of holdings.
OpenAI ties at 3rd, taking up 4% of holdings as well.
Other holdings in smaller percentages include Stripe, Plaid, Chime, Impossible Foods, Discord, and Klarna. (see below)
D/XYZ Exclusion.
The CEO has also said it will also not consider companies with
High turnover.
Heavy debt.
Less than $50 million raised from “reputable institutional investors”.
“Cultural health red flags.”
Note** - DXYZ didn't explain what a "red flag" is for them. They also didn't say why SpaceX's legal problems, like the sex discrimination claims, weren't considered a red flag
Modus Operandi.
I am curious - “How did this fund secure shares of those yet to IPO companies?”
Well, accordingly:
Prasad and his team leverage relationships to get access.
The company buys employee shares via “tender offers,” that allow workers to sell their holdings before a company goes public.
Another method is to buy shares in companies, through “forward contracts.” In these contracts, start-up employees can get cash by agreeing to transfer their company shares to D/XYZ when the company goes public or sells.
Note ** - “Forward Contracts” are controversial. Stripe has announced that it forbids its current & former employees to strike such deals and any forward contract is void.
Mr. Prasad said his fund was confident the deals were legal.
IPOs and Fees Levy:
Should any of the fund’s holdings go public, Tech100 says the returns on the investments will either be (a) reinvested in the fund or (b) paid as a dividend to investors.
Annual fees run 2.5%.
DXYZ Performance.
On 26 Mar 2024 (IPO) it closed at $9.00 per share and 617,000 shares changing hands.
On 08 Apr 2024, it closed at $99.79 per share, for a Market Cap of almost $1.1 Billion and 8,269,300 shares changed hands.
That was a +1,961% premium to its Net asset value.
On 7 Aug 2024, it closed at $9.63 per share with trading volume of 184,900 shares at the peak of “recession” fear.
Since then, market has recovered a fair bit of the lost ground.
On 30 Aug 2024, DXYX closed at $13.03 per share, with trading volumes of 133,597 shares.
My Viewpoints: (mine & mine only)
On the surface, this fund looks very exciting.
When investors heard about DXYZ, they got really excited. This drove the price way up, to almost 20x its normal value!
Thankfully, it has since came back down from Cloud 9.
Although the “beta” is unavailable, look at fund’s YTD performance (see above) reveals its volatility.
In the absence of the fund’s "beta", it’s big ups and downs since March’s IPO, revealed it's volatility. (see above)
As Bloomberg’s 10 Apr 2024 post rightly raised - what is wild about this fund is the portfolio is worth approx. $52.6 million only, or $4.84 per share.
Comparing $4.84 vs $43.50 (16 Apr closing), it’s still a +412.97% gain.
Bloomberg Intelligence, Research analyst - James Seyffart highlighted — biggest risk to investors in the new fund is whether the stock price reflects the value of the underlying assets.
Case in point - $Instacart, Inc. (Maplebear Inc.)(CART)$ & $Reddit(RDDT)$, two well-known tech companies that recently IPO, are trading below their last private valuations.
Parting gift, something about the CEO
Destiny XYZ Inc was cofounded in 2020 by Sohail Prasad and Samvit Ramadurgam.
They were once roommates and in 2014, co-founded Forge, a marketplace for private tech stocks.
Things turned sour between the partners and
Prasad terminated Ramadurgam’s employment in November 2023.
In the process, stripped Ramadurgam of his 32% equity in Destiny XYZ.
Ramadurgam has sued Prasad and the company, seeking to have the decision reversed.
As of 17 Apr 2023, the company did not reply to the request for comment about the suit.
Are you excited about this investment option ? I am and I cannot wait for SpaceX’s IPO; hopefully in the near future. Do NOT put all your eggs in basket-DXYZ, I say !
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