Buying Into the Vision

SpaceX valuation: it's a puzzlement (Nabaum/WSJ)

Ever since SpaceX demonstrated proof of its concept of reusable rockets, your humble blogger hss yearned for a piece of the action. However, SpaceX is a private company, and investment has been limited to a few private investors...until now. Through the magic of financial engineering and developments in capital markets it is possible to have a (small) ownership interest in Elon Musk's spacefaring company.

On Dec. 3, a little fund called the ERShares Private-Public Crossover ETF (ticker: XOVR) announced it had made privately held SpaceX its top holding. Like many outside investors, the ETF bought SpaceX through a special-purpose vehicle. An SPV is a private fund created to hold a specific asset. The fund paid $7.5 million, the equivalent of $135 per SpaceX share, says Joel Shulman, ERShares’ founder and chief investment officer.

On Dec. 12, XOVR publicized an additional $10 million purchase, raising its stake in the SpaceX SPV to 12% of the fund’s total assets. It paid an “implied” $185 per share on Dec. 11, says Shulman.

“Very fortuitously,” he says, SpaceX offered shares to private investors at $185 apiece at almost the same time, valuing the entire company at around $350 billion. XOVR then marked up its SpaceX position to $185, an instantaneous gain of 37%.

Even if the $350 billion valuation of SpaceX can be justified, the limited availability of shares through this arrangement ensures that much of the gains will go the structurers, not the ETF investors.

I'll wait for the public offering,