This post by Prakesh at Wealth of Geeks on how investors can buy SpaceX stock goes very well with another post I wrote on the key things you should know about SpaceX. There seems to be a queue of large financiers looking to put in money into the company, so it seems it has avoided the need to go public and have an IPO. But we don’t know what will happen in the future so keep your eyes peeled. I’ve written a series of posts on unlisted but popular companies investors would like to buy the stock of. I’ve covered Hulu, Instagram, Subway, Popeyes, and Epic Games. Tim
SpaceX is not a company that investors can buy on a stock exchange. It is not listed on the New York Stock Exchange (NYSE) or the Nasdaq. SpaceX is not a publicly-traded company; instead, it is a privately held company. Hence, an investor cannot buy or sell SpaceX stock on an exchange. The company does not even have a ticker symbol.
Therefore, it is not easy for a retail investor to own a piece of SpaceX. Most investors in SpaceX are institutional or high-net-worth investors. However, if a retail investor cannot directly buy SpaceX stock on an exchange, then the question remains of how to buy SpaceX stock.
What is SpaceX?
SpaceX is an aerospace company designing and building rockets and communication satellites. It was founded in 2002 initially as Space Exploration Technologies Corp. Elon Musk is the founder, chief executive officer (CEO), and chief engineer of SpaceX.
The main product is the reusable Falcon 9 rocket. These rockets provide lower-cost launch services for satellites weighing up to 440 pounds (200 kilograms). Other platforms include the Falcon Heavy, the Dragon spacecraft, and the autonomous spaceport drone ships (ASDS).
SpaceX is also developing a deep space transport called Starship. A prototype is awaiting Federal Aviation Administration (FAA) approval for an orbital test.
In addition, SpaceX is developing the Starlink project. This project will provide broadband service around the world from low-orbit satellites. SpaceX has launched 1,000+ satellites for Starlink and started a beta service in North America and the UK.
SpaceX Will Probably Not Have an IPO Soon
Despite the hopes of many retail investors, SpaceX will probably not have an initial public offering (IPO) anytime soon. Unfortunately, this fact means small investors cannot buy or sell shares on a stock exchange. There are two reasons for this point.
First, Elon Musk is reportedly hesitant about the idea of SpaceX going public. Since he is the founder and CEO, it will probably not happen. The reason is SpaceX’s long-term goal is to colonize Mars. However, investors may want shorter-term stock returns instead.
In addition, SpaceX has had little difficulty raising private capital, making an IPO less needed. According to Crunchbase, since 2002, the company has raised approximately $7.7 billion in private capital.
SpaceX, reportedly, had $6+ billion in demand for the October 2021 round. Hence, SpaceX can dictate terms and is having little difficulty raising money.
SpaceX is now more than 100-bagger stock for investors and employees who got shares early, but the shares are now expensive. Along these lines, SpaceX conducted a 10-for-1 stock split recently. Once completed, the stock price will be reduced to $56 per share, making each share more affordable to pre-IPO investors. The stock split does not change the total market value but only the stock price.
How to Buy SpaceX Stock
Most small investors cannot buy SpaceX shares; instead, institutional and high-net-worth individuals can buy shares. However, it is still possible to own a piece of SpaceX either directly or indirectly.
Venture Capital Funds
A straightforward way to buy SpaceX stock is to become a venture capital fund (VC) member investing in SpaceX. If you are an investor in a fund, you can access SpaceX shares.
However, there is a catch. You must be an accredited investor as defined by the Securities and Exchange Commission (SEC). The bottom line is you need to have an income of $200,000+ or $300,000+ with your spouse in the two most recent years. Alternatively, you can have a net worth of $1 million, but it can’t include your primary residence.
This hurdle prevents most people from buying SpaceX stock through VC funds. The number of people with an income of more than $200,000 is small. In the US, only the top 10% have median household incomes of more than $200,000. Few people have a net worth of $1,000,000, especially after excluding their primary home. According to the US Federal Reserve, the median net worth was $121,700 in 2019.
Baillie Gifford Trusts
The Baillie Gifford trusts are a second way to buy SpaceX stock. The firm has two trusts that own SpaceX stock. The first trust is the Scottish Mortgage Investment Trust, and the second one is the US Growth Trust.
The Scottish Mortgage Investment Trust (SMT) is a publicly-traded trust on the London Stock Exchange (LSE). In addition, it is a part of the FTSE 100 Index. The trust was founded in 1909. The trust’s annual report from 2021 states, “We have continued to build our holdings in SpaceX.”
The US Growth Trust (USA) mainly owns stock options and reportedly has exposure to SpaceX.
However, investing in trusts on the LSE may be difficult for US investors.
Probably the most straightforward and least risky way to gain exposure to SpaceX stock is by buying Alphabet (GOOG, GOOGL) stock. In 2015, Google invested $900 million with Fidelity Investments in SpaceX. At the time, the shares were worth almost 10% of SpaceX.
Hence, shareholders of Alphabet indirectly own SpaceX stock. You would hold only a tiny part of SpaceX, though. Its investment in SpaceX is only a small percentage of its total valuation.
An alternative way to buy SpaceX stock is through the secondary market. Several online marketplaces link employees in private companies with pre-IPO shares and investors. The platforms also connect VC firms seeking to sell shares before the IPO. Two online marketplaces are EquityZen and Forge Global.
However, this is risky for retail investors. The secondary market for pre-IPO shares is not like a stock exchange. An investor needs to know how to price shares of private companies, and this is not an easy task even for professionals. The last thing you want is to buy shares on the secondary market that will be worth less than you paid for them if they are mispriced.
Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
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Tim Thomas holds no positions in the stocks, ETFs, mutual funds, forex, or commodities mentioned.
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