SpaceX stock is not a company that investors can buy through the standard channels. You won’t find it on the New York Stock Exchange (NYSE) or Nasdaq. SpaceX is not a public company, it is a private company.
Therefore, an investor cannot buy or sell SpaceX shares using a brokerage account. The company doesn’t even have a ticker. Therefore, it is not easy for a retail investor to own part of SpaceX. Most investors in SpaceX are institutional or high net worth investors. If a retail investor cannot directly buy SpaceX shares on an exchange, the question remains how to buy SpaceX shares.
What is SpaceX?
Before we answer how to buy SpaceX shares, let’s first answer what is SpaceX? It is an aerospace company that designs and builds rockets and communications satellites. It was originally founded in 2002 as Space Exploration Technologies Corp. A significant attraction is Elon Musk, founder, chief executive officer (CEO) and chief engineer of SpaceX. He is one of the richest people in the world and has created opportunities for investors before.
The flagship product is the reusable Falcon 9 rocket. These rockets provide lower-cost launch services for satellites weighing up to 440 pounds (200 kg). Satellite launches generated about $1.6 billion in sales in 2021. Other platforms include the Falcon Heavy, Dragon spacecraft, and Spaceport Unmanned Vehicles (ASDS).
SpaceX is developing a deep space vehicle called the Starship. The prototype is awaiting Federal Aviation Administration (FAA) approval for orbital testing. Starship is part of NASA’s Artemis project, which aims to return humans to the moon.
In addition, SpaceX is developing the Starlink project. This project will provide broadband access services around the world from low orbit satellites. The company launched its first two prototype satellites in 2018 and its first 60 operational satellites in 2019. Since then, SpaceX has launched over 1,000 Starlink satellites and launched a beta service in North America and the UK.
SpaceX likely won’t be IPO anytime soon
Despite the hopes of many retail investors, SpaceX probably won’t be pursuing an initial public offering (IPO) anytime soon. Unfortunately, this means that small investors cannot buy or sell shares on the stock exchange. There are two reasons for this.
First, Elon Musk is reportedly skeptical about SpaceX going public. Since he is the founder and CEO, this probably won’t happen. The main reason is that SpaceX’s long-term goal is to colonize Mars. However, Elon Musk said that short-term shareholder demands could interfere with SpaceX’s long-term plan.
In addition, SpaceX had little trouble raising private capital, making an IPO less necessary and less likely. The company has raised about $7.7 billion in private equity since 2002, according to Crunchbase. The list below shows many of the 56 funding rounds, how much money was raised during those rounds, and the post-money evaluation.
- A Series A funding round in 2002 raised $12.1 million and had a post-money valuation of $18.8 million.
- In 2005, a Series B funding round raised $22 million, and SpaceX’s post-money valuation was $70.5 million.
- In October 2010, a Series F round raised about $50.6 million and the post-money valuation passed $1 billion for the first time, making SpaceX a unicorn.
- The 2015 Series G funding round was the first to raise over $1 billion, raising the company’s value to $10.1 billion.
- The Series H funding round raised $452.3 million, bringing the post-money valuation to $21.3 billion.
- The company raised $2.1 billion in October 2020, valuing it at $44 billion.
- In February 2021, SpaceX raised about $850 million, valuing the company at $74 billion. The company sold the shares for $419.99 per share.
- The most recent funding round came in October 2021, when the company raised $755 million at a price of $560 per share, valuing SpaceX at over $100 billion.
SpaceX reportedly had $6+ billion in demand for the October 2021 round. Consequently, SpaceX can dictate the terms and has little difficulty in raising money. For this reason, it is doubtful that SpaceX will go public anytime soon.
SpaceX currently has more than 100 equity stakes for investors and employees who have purchased shares in the past, provided the latest post-money valuation is correct. In line with this, SpaceX recently conducted a 10-to-1 stock split. Upon completion, the share price will be reduced to $56 per share, making each share more affordable. Splitting shares does not change the total market value, only the price of the share.
Pros and Cons of Buying SpaceX Shares
There are several pros to buying SpaceX stock. First, the company is at the forefront of commercial spaceflight and has huge growth potential. Further, the company’s service to launch the Falcon 9 satellites has been successful, giving hope for the future. In addition, the Starlink service is being tested and may also be successful. Finally, SpaceX can raise capital relatively quickly on its growth trajectory.
There are several downsides to buying SpaceX stock. First, the company is private, and pre-IPO shares are difficult to value and less liquid. Second, the company’s revenue is low compared to its $100 billion valuation. Thirdly, the company has serious ambitions that will cost dearly.
How to buy shares of SpaceX
While SpaceX is raising money, most small investors cannot buy shares. However, institutional and wealthy people can. Current investors include Founders Fund, Gigafund, Valor Equity Partners, GoldenArc Capital, Fidelity Investments, Baillie Gifford, Bank of America and dozens of other organizations.
However, it is still possible to own part of SpaceX, directly or indirectly.
Venture funds
An easy way to buy SpaceX shares is to become a member of a venture fund (VC) that invests in SpaceX. For example, Manhattan Venture Partners is an investor in SpaceX. If you are a partnership investor, you can access SpaceX shares.
However, there is one catch. You must be an accredited investor as defined by the Securities and Exchange Commission (SEC). The bottom line is that you must have an income of $200,000 or more than $300,000 with your spouse in the last two years. Alternatively, you can have a net worth of $1 million, but it cannot include your primary residence.
This obstacle prevents most people from buying SpaceX shares through venture capital funds. The number of people with incomes over $200,000 is small. The median household income in 2019 was $68,703. In the US, only the top 10% of people have an average net income of over $200,000. Few people have a $1,000,000 net worth, especially after excluding their main home. According to the US Federal Reserve, the median net worth was $121,700 in 2019, but the median net worth is $748,800, including primary homes.
Consequently, most retail investors will not qualify as accredited investors.
Bailey Gifford Trusts
Bailey Gifford trusts are another way to buy SpaceX stock. The firm has two trusts that own shares of SpaceX. The first trust is the Scottish Mortgage Investment Trust and the second is the US Trust.
The Scottish Mortgage Investment Trust (SMT) is a publicly traded trust on the London Stock Exchange (LSE). In addition, it is part of the FTSE 100 index and began operations as early as 1909. The foundation’s 2021 annual report states: “We continue to grow our holdings at SpaceX.” Therefore, it is possible to indirectly own SpaceX through this trust.
The US Growth Trust (USA) primarily holds stock options and is reportedly related to SpaceX.
Investing in LSE trusts can be difficult for US investors. Perhaps the easiest and least risky way to get access to SpaceX shares is to buy Alphabet (GOOG, GOOGL) shares. In 2015, Google invested $900 million in SpaceX through Fidelity Investments. At the time, the shares were worth nearly 10% of SpaceX shares.
Therefore, Google shareholders indirectly own shares of SpaceX. However, you will only own a tiny fraction of SpaceX. At the end of 2021, Google had $110,229 million in marketable securities on its balance sheet. His investment in SpaceX is only a tiny percentage of his valuation.
secondary markets
An alternative way to buy SpaceX shares is through the secondary market. Several online marketplaces connect employees of private companies with pre-IPO stocks and investors. The platforms also connect venture capital firms seeking to sell shares before an IPO. Two online platforms – EquityZen and Forge Global.
However, this is risky for retail investors. The secondary market for pre-IPO shares is not like the stock exchange. An investor must know how to value private company stocks, which is not an easy task even for professionals. The last thing you want is to buy shares on the secondary market that will be worth less than what you paid for them.
Final thoughts on how to buy SpaceX stock
Buying SpaceX shares is not an easy task. The company is private and usually raises money from institutional or wealthy investors. It had no trouble raising money, so it’s unlikely that SpaceX will go public anytime soon. In addition, Elon Musk questioned this possibility, although Starlink could still be spun off into a separate company.
Investors can access SpaceX through venture capital funds, Baillie Gifford Trusts, the secondary market, and ownership of Alphabet stock. However, investors should keep in mind that investments in private companies are not low-risk or short-term. Many institutional and wealthy investors have held stock for years, but they can afford it.
Disclosure: The author is not a licensed or registered investment advisor or broker/dealer. It does not give you individual investment advice. Please consult a licensed investment professional before investing your money.
This article originally appeared on Wealth of Geeks.