SpaceX IPO highlights delays and uncertainty for SPV investors

In short: As SpaceX goes public, some people who invested through SPVs may wait months to learn what they really own.

What's going on

Some SpaceX investors put money into the company through SPVs, short for special purpose vehicles. An SPV is like a group purchase, where many people pool money so the group can buy into a company.

TechCrunch reports that SpaceX is a special case because some of these SPVs are stacked in multiple layers. In some cases, investors in one SPV later formed a new SPV using their stake, creating a chain that can be four or five layers deep. Nearly a dozen SPV managers and secondary market investors told TechCrunch that people in the lower layers may end up with fewer shares than they expected, or in rare cases, none at all.

A key reason is timing. After an IPO, many early holders face “lock-ups,” which are rules that prevent certain people from selling shares for a set period. Sources told TechCrunch that SPV managers generally cannot pass shares down to their investors until they get access to the shares themselves. Justin Ernest of Sabertooth Capital said a first-layer SPV has 30 days to distribute shares, which can push each lower layer back even further. Ernest estimated the bottom layer might wait eight or nine months.

There are also worries about fees and communication. One investor told TechCrunch that some shares may be reduced by fees taken by the SPV, and updates can get lost because each layer only sees what the layer above shares.

What to watch

TechCrunch notes that a bigger concern is fraud, especially if a manager disappears or misrepresents access to shares. As lock-ups lift over the months after the IPO, investors and regulators may get a clearer picture of which SPVs are legitimate and which are not.

Source: TechCrunch AI