$Destiny Tech100 Inc(DXYZ)$ rose 223.5% last week and rose another 17.21% on Monday.
The rise of DXYZ is mainly attributed to the continued benefit of SPACE X & OPEN AI, the fund's main holdings, after Trump was elected the 47th President of the United States.
The reason is that people expect Elon Musk, as Trump's biggest supporter, and his startup SPACE X may receive more orders in the future.
1. Many tiger friends may not know much about $Destiny Tech100 Inc(DXYZ)$
Destiny Tech100, stock code DXYZ, which was listed in March 2024, is somewhat different from ordinary US stock companies and ETFs. DXYZ is neither an ordinary enterprise nor an ETF, but a closed-end fund management company registered under the Investment Company Act of 1940.
Its core goal is to include 100 top venture capital/venture capital (VC)-backed private technology companies in its portfolio. Since its establishment on May 12, 2022, the fund has not only opened the door to the private equity market for ordinary investors, but also marked a bold innovation in the traditional investment model.
As of March 31, 2024, $Destiny Tech100 Inc(DXYZ)$ has held shares in 23 companies, and its capital deployment accounts for approximately 90% of the initial funds. Among them, more than 40% of the funds are concentrated in well-known companies in aerospace (such as SpaceX, Axiom), entertainment (such as Epic Games, Discord), financial technology (such as Brex, Stripe) and artificial intelligence/mobile fields (such as OpenAI).
SpaceX, the space exploration technology company founded by Musk, tops the list with a 36.6% stake, with a share value of approximately $21.81 million. Although SpaceX's latest valuation has reached approximately $200 billion, the Destiny Tech100's holding ratio is relatively small. It is followed by space travel company Axiom Space, which has obtained an exclusive contract from NASA to build the follow-up plan of the International Space Station. In addition, although OpenAI, the artificial intelligence company that owns ChatGPT, only accounts for 3.6% of the portfolio, its influence cannot be underestimated.
DXYZ Holdings
Many high-profile startups, after years of struggle, often seek to go public when valuations are high. Destiny Tech100 provides investors with a way to participate in these companies before they go public, allowing them to indirectly share the company's growth dividends and have the opportunity to obtain high returns. According to the company's prospectus, if any company in the portfolio goes public, the investment income will be reinvested in the fund or returned to investors in the form of dividends.
2. What kind of companies can be selected for $Destiny Tech100 Inc(DXYZ)$ ?
The fund's investment strategy focuses on private technology companies, with the goal of integrating 100 eligible companies. To be selected for Destiny Tech100, companies must pass the rigorous review of the institution (i.e., raise at least $50 million in funds from reputable institutions), and the repayment priority of the preferred shares issued must be linked to the valuation and meet key health indicators (such as moderate debt levels, transparent corporate structure and governance). In addition, the selected companies must meet certain maturity and stability requirements.
When building a portfolio, Destiny Tech100 takes a unique unstructured approach. It purchases shares from existing shareholders or employees through "tender offers" and "forward contracts", invests in different types of equity, equity-linked securities (such as convertible bonds), warrants, etc., and is involved in private equity funds. But it is worth noting that the fund's management fee is relatively high, reaching 2.5% per year.
Destiny Tech100 also revealed its future investment direction:
1. Large-cap stocks: Companies with valuations exceeding US$10 billion provide stability for the portfolio, while still favoring high-growth technology companies.
2. Mid-cap stocks: As rising stars among unicorns, these companies are valued between US$750 million and US$10 billion.
Destiny states on its website that for many companies in the early stages of an initial public offering (IPO), there is indeed an opportunity to earn 10-50 times the return.
In addition, Destiny Tech100 also attaches great importance to characteristics such as potential market size and growth rate, company growth rate, light assets, software and platform business models, network effects and economies of scale.
3. Investment analysis and risk tips of $Destiny Tech100 Inc(DXYZ)$
From a VC perspective, if the risk is spread across 100 companies, then only a few companies need to succeed to make up for the failure of other companies. However, the current highly concentrated holdings of Destiny Tech100 mean that it has more additional funds for further investment (and at a reasonable price) remains to be seen.
3.1 Market speculation and high risk
• The surge in Destiny Tech100 is a phenomenon of "meme stocks" level, with a market value far higher than the fair value of its portfolio, highlighting the speculation of the market and the high expectations of investors.
• This high premium represents high risk, and investors should be cautious.
3.2 Liquidity and transparency of the portfolio
• Destiny Tech100 represents a basket of unlisted stocks, including 23 furniture companies, with poor liquidity and difficult to assess fundamental value.
• Investors can only rely on the company's regularly submitted annual reports or FORM N-CSR submitted to the SEC to obtain the latest information, with limited transparency.
3.3 Well-known companies in the portfolio
• Although the portfolio includes some well-known companies such as SpaceX and OpenAI, which have significant influence and growth potential in their respective fields, the financial information of startups is limited and opaque, and whether they can successfully go public remains unknown.
3.4 Other influencing factors
• Factors such as market liquidity, the overall performance of technology stocks, and the global economic situation will also affect the stock price of Destiny Tech100.
• Excessive premium may limit the room for stock price appreciation.
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