SpaceX was founded with the goal of disrupting the global aerospace industry and the specific launch market. Furthermore, aside from its vision of ushering in a new era of space exploration and advancing the future of space flight, it is also a satellite communications provider through its Starlink satellite internet constellation and a commercial space transportation services provider catering to space agencies and defense or military forces.
The mission and vision of this company, in addition to its existing revenue sources and prospects, make it an interesting growth investment option. However, when it comes to considering investing in SpaceX, take note that it is not a publicly-listed company and there is no direct avenue to purchase and own its shares. There are still several options to invest in this company and this article describes each.
How To Invest in a Private Company: A Concise Guide to Investing in SpaceX
SpaceX intends to remain a private company for as long as it could. Elon Musk explains that the short-term demands of public shareholders conflict with his long-term ambitions. He wants to maintain full control without succumbing to pressures from public investors. The main downside to this staunch refusal to become a publicly-listed company is that funding can be limited to large institutional investors and creditors.
It is important to note that being a private company also limits random individuals from wanting to bet on its vision and future. There are still several workarounds when it comes to investing in Space X. These include indirectly investing in entities associated with SpaceX, purchasing shares from existing investors or shareholders via third-party platforms, and waiting for possible issuance of corporate bonds. Take note of the following details:
1. Indirect Investing in Entities Associated with SpaceX
There are two indirect ways to invest in SpaceX. These include investing in businesses that the company works with and in entities that hold an interest in SpaceX. It is also possible to invest in this company via pooled funds such as exchange-traded funds.
Some of its business-to-business partners include Blue Origin and Rocket Labs. It is also possible to invest in SpaceX through its suppliers. Determining these suppliers require thorough market research. Possible examples include Garmin and Iridium Communications.
Entities that hold an interest in SpaceX include Fidelity Investments, Alphabet, and Bank of America, as well as private equity firms such as Mirae Asset Venture Investment, Kinetic Partners, Mathew Brown Companies, and Alpha Dhabi, among others
An investor can also look for exchange-traded funds or ETFs with interests in space technology companies. Examples include ARK Space Exploration & Innovation ETF, iShares U.S. Aerospace & Defense ETF, and SPDR S&P Aerospace & Defense ETF.
2. Purchasing Shares From Current or Existing Shareholders
It is also possible to invest in SpaceX by purchasing shares from existing shareholders. These include existing individual or institutional investors, as well as employees who have received stock compensation as part of their employment benefits package.
However, purchasing shares from private companies is not as straightforward as stock investing. An investor needs to be accredited to be legally eligible to purchase private shares. The United States Securities and Exchange Commission has listed the guidelines.
These guidelines require a particular investor to have a net worth of more than $1 million, excluding his or her private residence, an income of more than $200000 per year or $300000 if married, or a valid securities license such as FINRA Series 7, 65, or 82.
Nevertheless, once the requirements are satisfied, the investor needs to look for information regarding the sales of shares. This can be obtained from insiders and firms such as EquityZen that specialize in connecting potential investors with private companies.
3. Looking for Possible Rounds of Corporate Bond Issuance
It is also possible for SpaceX to issue corporate bonds to raise funds. Some reports have noted that the company might issue hundreds of millions of dollars in international convertible bonds in the future as part of its new rounds of funding.
Looking for possible rounds of corporate bond issuances can be a challenging pursuit. Interested investors must keep themselves updated with possible fund-raising initiatives and these new rounds of funding do not guarantee corporate bond issuance.
It is also important to highlight the fact that bonds issued by private companies are typically sold to accredited investors, which are individuals or institutions that meet certain financial criteria. This is similar to purchasing shares of private companies.
There are several reasons why companies like SpaceX do not depend on bonds to raise funds. The most important one is that bond issuance can put constraints on its financial position because bonds need to be serviced and doing so takes cash flow.
Important Reminder: The Risks of Investing in Private Companies Such as SpaceX
The aforesaid discussions list and explain the possible vehicles or options available with regard to investing in SpaceX. It is possible to become an investor but it is important to underscore the fact that each available option is not as straightforward as investing in the stocks or bonds of publicly-listed companies. Furthermore, because of the complexities involved, each does not guarantee that an interested individual can become an investor.
It is important to note that investing in private companies carries risks. These include liquidity issues stemming from the fact that their shares are not widely traded on public platforms. The lack of transparency and market information can also prevent one from making sound decisions. Investors should evaluate the reason behind their investment decisions, their specific risk tolerance, and their financial situation before investing in SpaceX.
