Latest / Elon Musk Podcast / How to buy SpaceX Stock before IPO

Transcript

How to buy SpaceX Stock before IPO · Elon Musk Podcast

• 0:00
  SpaceX is targeting an initial public offering valuation of
• 0:03
  $1.5 trillion, a figure that would instantly make it one of
• 0:09
  the most valuable companies on Earth.
• 0:10
  Yeah. And just to put that into
• 0:11
  perspective, I mean that specific valuation is roughly
• 0:15
  equal to the entire current worth of Tesla.
• 0:18
  Wow. Right.
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  So we are looking at a massive financial event, essentially
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  positioning this upcoming offering to be a new flagship in
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  the public markets. With all this value locked U
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  before the company even hits the public market, how do regular
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  investors actually get a piece of it without falling into
• 0:37
  massive financial traps? Well, the fundamental dynamic of
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  wealth creation has shifted entirely away from the public
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  sphere. Yeah, companies are staying
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  private much longer than they used to, meaning the vast
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  majority of value accumulation happens way before retail
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  investors can buy a single share.
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  Because in previous eras, I mean a tech company would go public
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  specifically to raise the capital it needed.
• 0:58
  Exactly. They needed the public market to
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  build their factories, hire their engineers, and, you know,
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  grow their footprint, right. You could buy shares of early
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  personal computing or e-commerce companies as a regular person,
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  hold those shares in your standard brokerage account, and
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  just benefit from the explosive exponential growth over the
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  following decades. But now the private equity
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  markets are so flush with institutional cash that
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  companies can scale to absolute global dominance without ever
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  needing to ring the bell on a public exchange.
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  Yeah, and the frustration for the everyday investor is very
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  real. By the time a company of this
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  scale finally decides to offer public shares, it is already a
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  mature trillion dollar behemoth. Right, the wealth generation
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  that used to be available to everyone has been walled.
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  Off completely walled off, it's accessible only to massive
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  venture capital firms and institutional wealth.
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  You are basically left fighting for the scraps of growth after
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  the major multipliers have already been extracted behind
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  closed doors. So the traditional rules of the
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  market kept everyday people completely locked out of that
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  early growth. They did, but we are seeing a
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  structural shift with the introduction of new financial
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  vehicles designed specifically to punch holes in that wall
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  funds like the Ark Venture Fund and the private shares fund.
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  They operate on an entirely different mechanism than
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  traditional venture capital. How so?
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  They allow regular investors to buy into private names like
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  SpaceX, Open AI, and XAI with a remarkably low minimum
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  investment. Like how low are we talking?
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  We are talking about minimums starting at just $500.00 for the
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  Ark fund. Oh wow.
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  Yeah or $2500 for the private shares fund.
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  They completely bypassed the old regulatory hurdles that required
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  you to prove you had millions of dollars in net worth just to
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  participate. It is essentially like getting
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  AVIP backstage pass to an exclusive concert, but you only
• 2:52
  had to pay the price of a general admission ticket.
• 2:54
  That's a great way to look at it.
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  You are getting access to the exact same closed door equity as
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  the massive venture capital firms sitting right alongside
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  them at the table without needing millions of dollars to
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  buy your way in. Right, you get the access, but
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  the mechanics of how these specific vehicles operate, they
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  are known as interval funds, come with a massive trade off
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  regarding your liquidity. OK, what's the catch?
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  Well, taking your VIP pass analogy, it is actually more
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  like agreeing to split a cross country carpool with a dozen
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  strangers. It is incredibly cheap and it
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  absolutely gets you to the destination.
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  But you cannot just ask the driver to pull over and let you
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  out in the middle of Nebraska because you changed your mind or
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  you know, saw a scary news headline.
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  Right. You are locked into the vehicle
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  until the designated rest stops. Because you cannot just log into
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  your brokerage app and sell your shares on a Tuesday afternoon
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  just because you want cash to buy something else.
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  Exactly. You can only sell your shares
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  during specific quarterly repurchase windows.
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  The fund managers set these dates in advance, and even
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  during those specific windows, the fund typically only
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  repurchases up to 5% of its outstanding net asset value.
• 4:02
  Wait, so if the broader market experiences a sudden panic and a
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  large group of investors get spooked and tries to pull their
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  money out of the fund all at once, they simply cannot?
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  They cannot. The exit door is mathematically
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  restricted. If the request to sell exceed
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  that 5% limit, your request is prorated.
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  Right. So you might only get a fraction
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  of your money out. Yes, and you have to wait
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  another three months to try again.
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  So you are exchanging the freedom of daily trading for the
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  privilege of holding private equity?
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  That is the trade off, yeah. You have to lock your money up,
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  surrender your control over when you exit, and wait for the
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  corporate events to play out. But knowing how people are
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  fighting to buy in, we need to examine why that valuation is
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  sitting at $1.5 trillion in the first place.
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  Yeah, the Core Drivers. Right.
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  This massive number is heavily driven by SpaceX pitching itself
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  as the ultimate infrastructure provider for artificial
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  intelligence through orbital compute on its Starling
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  satellites alongside massive military contracts.
• 5:03
  Wait, backup space based data centers?
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  Yes. The concept involves using the
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  satellite network to actually host artificial intelligence
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  data processing directly in low Earth orbit.
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  OK, wow. When you look at the physical
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  limitations of building massive AI data centers on Earth, you
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  run into severe bottlenecks very quickly.
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  Sure, like power grids. Exactly.
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  You have to secure massive amounts of electricity from an
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  aging grid. Pump millions of gallons of
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  water just to cool the servers so they do not melt and acquire
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  vast tracts of real estate. And moving the compute
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  infrastructure into space solves several of these physical
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  constraints simultaneously. It does.
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  You have access to constant solar radiation for power, and
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  the natural environment of space provides a completely different
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  paradigm for thermal management. Right, but this concept goes far
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  beyond commercial tech applications.
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  The United States Space Force is fast tracking a highly lucrative
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  contract for a project known as Starshield.
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  Starshield, right? Yeah, this is a military
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  specific classified satellite network designed for highly
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  secure communication and observation.
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  And the catalyst driving these massive defense contracts stems
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  from rising geopolitical tensions and aggressive rhetoric
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  from China regarding Taiwan. Yeah.
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  And when you look at the political landscape surrounding
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  these global tensions, both left wing and right wing political
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  concerns point directly to the necessity of these defense
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  contracts. It's a shared focus.
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  Impartially speaking, regardless of domestic political
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  affiliation, the push for secure, unassailable
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  communication networks in the face of international threats is
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  a shared, heavily funded priority for global defense.
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  This changes the entire physical structure of the Internet and
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  artificial intelligence. It really does.
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  It's severely limits the vulnerability of ground based
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  data centers. If a traditional data center
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  loses power due to a grid failure, or if undersea
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  communication lines are physically severed by a hostile
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  actor during a global conflict, the terrestrial network goes
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  down. Which is a massive risk.
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  But putting the infrastructure in space creates an incredibly
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  resilient web. It opens up an entirely new,
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  highly secure revenue stream that governments are willing to
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  pay a massive premium for. Right, you are moving the most
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  critical data processing and military communications off the
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  surface of the Earth entirely. Placing it essentially out of
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  reach of conventional physical attacks.
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  Exactly. So knowing the massive potential
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  value hidden in these space and AI infrastructure projects, we
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  have to look at the structurally flawed vehicles investors are
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  using to try and capture that. The traps, yeah, right.
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  Some of these public market structures have deep
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  mathematical vulnerabilities built right into their cloning.
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  Retail investors are pouring money into exchange traded
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  funds, specifically vehicles like the Private Public
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  Crossover ETF. This specific fund holds a large
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  position in SpaceX. Alongside standard public tech
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  companies. You have artificial intelligence
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  and social media giants that trade every second of the day
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  sitting right next to private space equity in the exact same
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  fund. And the theory behind the
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  structure is to blend the stability and daily liquidity of
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  public companies with the explosive growth of private
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  equity, right? They achieved the private
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  exposure through special purpose vehicles.
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  Essentially, many companies created just to hold the private
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  shares and then bundle it all into one tradable ticker symbol.
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  So you get the thrill of holding private assets, but you can
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  still sell your ETF shares on the open market whenever you
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  want. That's the pitch, yes.
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  But if financial regulations strictly cap and ETF's private
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  company exposure at 15%, and this fund's private exposure has
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  ballooned past that limit because the private companies
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  grew so fast, doesn't that force a massive problem?
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  Oh, it forces a severe mechanical risk, right?
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  The regulations capping illiquid assets at 15% exist to ensure
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  the fund remains liquid for the everyday investor.
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  If a massive wave of regular investors decides to sell their
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  ETF shares, the fund managers need to be able to sell their
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  underlying assets quickly to give those investors their cash.
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  And you cannot sell private shares quickly.
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  No, there is no daily buyer for them.
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  Because the private assets in the specific fund grew so
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  quickly relative to the public stocks in the portfolio, the
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  fund could be forced to sell off its private shares just to
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  comply with the rules. They would have to trim their
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  best performing asset, finding a private buyer at potentially
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  less than ideal terms just to keep the underlying math legal.
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  Which severely limits the upside for investors using this
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  specific vehicle. It creates a highly frustrating
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  scenario where the fund might be forced to liquidate its winning
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  position right before the initial public offering actually
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  happens. Exactly.
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  You buy the fund specifically to ride that massive private growth
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  into the public market, and a regulatory technicality forces
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  the fund managers to cash out your chips early.
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  OK, the ETF Rep has a major structural flaw.
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  Let's look at another option. Yeah, closed end funds offer a
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  different path because they do not face that same 15%
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  regulatory cap on illiquid private assets, right.
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  A closed end fund issues a fixed number of shares just once.
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  It is like a limited edition release.
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  Once their shares are out in the world, they trade on the open
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  market between buyers and sellers based purely on supply
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  and demand. And because the number of shares
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  is permanently fixed, the price you pay on the open market can
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  disconnect wildly from the actual mathematical value of the
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  assets the fund holds, known as the net asset value.
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  The Destiny Tech 100 Closed and Fund avoids the 15% rule
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  entirely and holds a significant portion of SpaceX, but it
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  currently trades at a 41% premium to the actual value of
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  its underlying assets. Yeah, it does.
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  Paying a 41% premium is absurd. It is exactly like paying
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  $140.00 for a $100 bill just because you like the serial
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  number on it. You are paying purely for the
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  hype of owning the asset, not the actual fundamental value of
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  the company's balance sheet. I actually see the logic in it
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  from a different angle, really. In the highly restricted private
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  market, some investors willingly and rationally pay that hype tax
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  just to guarantee they have a seat at the table.
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  I guess so. When an asset is this exclusive
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  and tightly controlled by massive institutions, there is
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  no discount rack available for the retail investor.
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  The premium functions as the necessary cost of admission.
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  These investors are calculating that the future growth of these
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  tech monopolies will easily eclipse that initial markup over
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  the long term. I understand the logic of
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  scarcity, but paying this massive premium severely limits
• 11:40
  an investor's margin for error. Well sure, the underlying tech
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  companies have to execute Florida State just to justify
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  the entry price you paid on day one.
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  If you start in a massive hole due to the premium, the company
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  has to grow its fundamental value by 41% just for you to
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  break even on your initial investment.
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  That's the risk, absolutely. Especially since this specific
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  fund pays 0 dividends, you aren't even getting a cash yield
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  to cushion the blow while you wait for that growth to happen.
• 12:09
  If you enjoy tech news like this, take a second and hit the
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  follow or subscribe button on whatever podcast platform you
• 12:15
  are on right now. It helps the show so much.
• 12:17
  Thank you. So since pre IPO access is
• 12:19
  riddled with heavy premiums, liquidity lockups and regulatory
• 12:23
  traps, we should examine a strategy that actually pays you
• 12:26
  to wait for the event to happen. Yeah, this leads us to the post
• 12:29
  IPO income strategy. The Nuveen NASDAQ 100 Dynamic
• 12:33
  Overwrite Fund offers an 8.9% dividend yield, currently trades
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  at a slight discount to its actual value, and will naturally
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  include companies like SpaceX once they go public and join the
• 12:45
  massive tech indexes. So rather than fighting your way
• 12:48
  through the restricted private market, locking your money up in
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  an interval fund, or paying a massive hype tax for a closed
• 12:55
  end fund, you position yourself in the public index where the
• 12:58
  company is naturally going to land anyway.
• 13:00
  Right. The mechanics of how this
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  specific fund generates that massive dividend are highly
• 13:05
  strategic. Yeah, how does that work?
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  The fund uses a covered call strategy.
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  It holds the major tech stocks in the index, but it actively
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  sells the rights for other investors to buy its holdings at
• 13:16
  a fixed price in the future. OK.
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  By selling those contractual rights, the fund generates
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  massive amounts of cash income upfront, which then passes on to
• 13:24
  you as that high 8.9% dividend. Hold on, if they are selling the
• 13:28
  rights to their best stocks, doesn't that cap how much money
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  you can make if the market skyrockets?
• 13:33
  It does, yes. Yes, you are sacrificing the
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  absolute ceiling to raise the floor.
• 13:39
  OK, to put it simply, imagine you own a house worth $500,000.
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  You sign a legal contract saying someone can buy your house next
• 13:49
  year for $600,000 and they pay you $10,000 right now for that
• 13:54
  privilege, right? If the neighborhood stays stable
• 13:58
  and the house remains at 500,000, you keep your house and
• 14:01
  you keep the $10,000 in cash. And that cash is your dividend.
• 14:05
  Exactly, but if the neighborhood experiences a massive boom and
• 14:08
  your house is suddenly worth $1,000,000, you still have to
• 14:11
  sell it to that person for 600,000.
• 14:13
  I see. You cap your maximum upside to
• 14:16
  guarantee cash in your pocket today.
• 14:18
  This limits massive gains during aggressive bull runs.
• 14:22
  If a tech stock double S overnight, the fund has already
• 14:25
  promised to sell it at a lower price, so you miss out on that
• 14:28
  explosive peak. But it opens up a steady stream
• 14:30
  of income and provides significant mathematical
• 14:32
  insulation against market drops. Yeah.
• 14:34
  It really does. If the tech sector experiences a
• 14:37
  sudden downturn, all that cash you collected from selling those
• 14:40
  contracts cushions the blow to your portfolio.
• 14:42
  Exactly, it completely changes the strategy from paying a
• 14:46
  massive premium for pre IPO hype to getting paid a steady
• 14:50
  reliable yield while safely waiting for the stock to enter
• 14:53
  the public market. You are turning patients into an
• 14:56
  active cash generating position, letting the market pay you while
• 15:00
  the complex corporate events play out over time.
• 15:03
  Retail access to private tech giants is more available than
• 15:05
  ever, but avoiding high premiums and structural traps is just as
• 15:09
  crucial as finding the right company.
• 15:11
  Once these space and artificial intelligence conglomerates
• 15:14
  become the largest public entities on Earth, how will that
• 15:18
  massive concentration shift the balance of power in your
• 15:21
  standard retirement index funds? If you're not subscribed yet,
• 15:24
  take a second and hit follow on whatever app you're using.
• 15:27
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