Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / How Retail Investors Are Buying SpaceX Ahead of the IPO
Transcript
- Lucas: So it finally happened. This week, a handful of major brokerages started offering retail investors direct access to SpaceX shares ahead of its expected IPO later this year or early next year. And I want to talk about what that actually means — because it's not quite like buying Apple stock on your phone. Luna: And this isn't the first time we've seen pre ipo access offered to retail, but SpaceX is different. That valuation — estimated around $180 billion — makes it the biggest private company to open up this way. Lucas: Exactly. We've seen this with companies like Stripe and Instacart in the past, but those were smaller. SpaceX is a cultural phenomenon. People want a piece of it. And the brokerages — Fidelity, Robinhood, a few others — are offering so-called 'pre ipo placement programs.' The question is: how do these actually work, and are you getting the same deal that institutional investors get? Luna: Let's start with the basics. What's the mechanism? Is it a special purpose vehicle, a direct share purchase — how does it actually happen? Lucas: Typically, the brokerage partners with a firm that sources shares from existing SpaceX employees or early investors who want to sell. Those shares are then pooled and offered to retail clients. But here's the catch: the brokerage usually charges a fee — sometimes a percentage of the investment, sometimes a flat fee. And the price you pay might be higher than what institutional investors pay because there's a markup built in. Luna: So you're buying from a secondary market, not directly from the company. That means the price is set by supply and demand among sellers and the placement agent — not by an IPO price discovery process. Lucas: Right. And there's also a lock-up period. You can't sell those shares immediately. Typically it's six months to a year, sometimes longer. So you're tying up capital in an illiquid asset that could drop in value if the IPO doesn't go as planned or if the broader market turns. Luna: And that's worth noting given the current environment. The S&P 500 is at 7,403, basically flat over the past five days. The VIX is down to 17.20 — so volatility is low, but the market's not exactly roaring either. If we hit a downturn, retail investors could be stuck holding expensive SpaceX shares with no exit. Lucas: Let's talk about the numbers. SpaceX's last funding round valued it at $180 billion. But that was in a private transaction. When the company actually IPOs, the market will set the price. If the IPO prices below the secondary market price you paid, you're underwater before you can even trade. It's happened with other high-profile names like Rivian and Coinbase. Luna: And there's also the fee structure. I've seen some programs charge up to 2 percent upfront, plus an annual management fee if it's held in a special purpose vehicle. That's not nothing on a $10,000 investment. Lucas: So the pitch is democratizing access to private markets. And there's truth to that — historically, only accredited investors with high net worth could get into pre ipo deals. But the reality is that retail investors are taking on risk that institutions don't, and they're paying for the privilege. Luna: Is that necessarily bad? I mean, people can choose to take that risk. But they need to understand what they're buying. Lucas: Absolutely. And that's the whole point of this episode. If you're going to buy SpaceX pre ipo, you should know that you're buying a secondary-market stake with a markup, a lock-up, and no guarantee of the IPO price. It's not the same as buying the stock on the open market. Luna: And there's a broader trend here. We're seeing retail investors chase alternative assets — private credit, venture capital, pre ipo stakes. The SEC has been looking at whether these offerings need more disclosure. This SpaceX move could accelerate that. Lucas: It's a big test case. If a lot of retail investors lose money on these deals, you might see stricter regulation. But if it works out — if SpaceX IPOs at a premium and those early buyers make money — it could open the floodgates for other private companies to offer similar programs. Luna: Right. And it's not just SpaceX. We've seen Reddit, Discord, even Stripe exploring direct listings or IPOs. The private market is becoming more accessible, but the structures are still opaque. Lucas: That's the takeaway for me. Before you buy into a pre ipo program, ask: what's the fee? How long is the lock-up? What's the valuation based on? And is this money you can afford to tie up for a year or more? Because if the market turns — and it always does — you might be waiting a long time for liquidity. Luna: And just to put a number on it: the yield curve is still positive — the ten-year is at 4.67 percent, the two-year at 4.13 percent, so the spread is about 53 basis points. That's not screaming recession, but it's not booming either. We're in a slow-growth environment. Real GDP growth annualized at 2 percent. That's okay, but not strong enough to guarantee a hot IPO market. Lucas: Exactly. So a lot depends on timing. If you buy now and the IPO doesn't happen until 2027, you're sitting on an illiquid asset for over a year. That's a real opportunity cost. Luna: I think the key is: don't treat it like a lottery ticket. Treat it like a private investment with a long horizon. And only put in what you can afford to lose. Lucas: Yeah. And if you're interested in this space, there are ETFs now that track pre ipo companies — things like the Renaissance IPO ETF. That gives you diversified exposure without the single-company risk. Luna: But the allure of SpaceX specifically is hard to beat. It's Elon Musk, it's space, it's the most valuable private company in the world. People want in. Lucas: And they can get in now. Just know what you're signing up for. Luna: If today's episode was useful to you and you want to keep it ad-free, buy me a coffee dot com slash fexingo helps. Lucas: Yeah, that's the link. A small gesture that goes a long way in keeping these conversations going. Luna: So circling back — one thing I think is under-discussed is the role of the placement agents. These are firms that source the shares. They often have relationships with employees at private companies. How do we know they're getting the best price for retail? Lucas: We don't. There's no transparency in the secondary market. The brokerages might have an incentive to mark up the price because they earn a fee. It's not necessarily a conflict of interest, but it's a structural disadvantage for retail. Luna: And there's also the question of valuation. SpaceX's last round was $180 billion, but that was months ago. What's the fair value today? If the company's Starlink business is growing slower than expected, or if there are delays in Starship, the valuation could be lower. Lucas: Right. And retail investors don't have access to the same financials that institutional investors do. SpaceX is private, so it doesn't file detailed quarterly reports. You're buying based on public statements and media reports. That's a lot of uncertainty. Luna: So what's the bottom line? Should a typical retail investor buy SpaceX pre ipo? Lucas: I think it depends on your portfolio and your risk tolerance. If you have a well-diversified portfolio and you're comfortable with the lock-up and the fees, it could be a small satellite position. But if you're betting big on it — say, more than 5 percent of your investable assets — that's too concentrated for a pre ipo stock. Luna: And the fees matter. A 2 percent upfront fee on a $5,000 investment is $100. That's not huge, but it's a cost you wouldn't have if you bought the stock after the IPO. Lucas: And the lock-up means you can't sell if the stock drops. That's a real risk. We've seen pre ipo stocks like Uber and Lyft trade below their IPO price for months after listing. Early buyers who paid a premium in the secondary market lost money. Luna: So patience is key. If you buy, plan to hold for at least a year after the IPO. Maybe longer. Lucas: Yeah. And keep an eye on the overall market. The S&P is near all-time highs, the VIX is low — that's a complacent environment. If a correction comes, high-growth names like SpaceX could get hit hard. Luna: Alright. I think we've given people a lot to think about. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to everyone listening. We'll be back tomorrow with another topic.