SpaceX: Five Insights for Pre-IPO Investors

After many years offering SpaceX shares to my clients, today I congratulated those who invested early and then decided to analyze more than 100 transactions where the buyers decided not to invest. Of course, such retroactive analysis should be taken with a grain of salt (the insights would be useless if SpaceX didn’t have a successful IPO), but I still thought there would be some grains of insight.

Note that these principles only apply when you have already completed your fundamental due diligence and have made a firm decision to add a target asset to your holdings—and specifically for highly constrained, “in-demand” names. I am always available to let you know if one of your targets meets these criteria.

Here are five things we can learn from my SpaceX trades that didn’t close:

1. Fund Layer Filters May Work Against You. Whether a Special Purpose Vehicle (SPV) is single-layer or two-layer is secondary if the underlying managers are respectable and the total fee burden remains reasonable. Turning down a prime allocation in a generation-defining company over a multi-layered structure is like rejecting a bar of gold because it arrives wrapped in two layers of protective packaging. If the counterparty is institutional and the all-in pricing works, focus on asset access rather than structural aesthetics.

2. Reconsider an Aversion to Carried Interest. Many investors turned down my first SpaceX deal on principle because it was 1/10 and they wanted 0/0, but that stance frequently misinterprets the structural mechanics of secondary syndication. Managers often offer LPs the opportunity to piggyback directly on their primary round allocations, providing access to these shares at cost (where management fees exist, they generally do cover administrative and regulatory expenses). At 0/0, the fund manager would essentially be providing free access to the shares. Carry is the heart of their model and aligns their upside with your returns. My clients who secured SpaceX shares years ago are not concerned today about sharing a percent of their windfall with the GPs who made the transaction possible; in fact, sharing the wealth is a great way to build a durable GP-LP relationship.

3. Once You Select a High-Demand Target, Do Not Haggle. Many deals failed to close because the buyer demanded a valuation just below what the seller was asking (for instance, passing on a $33Bn valuation and offering $30Bn). While negotiation is perfectly appropriate for standard secondary transactions, this approach fails with hyper-growth names. In a hot market, haggling simply hands the allocation to a more decisive buyer, and I watched that happen a dozen times. Pro-tip for highly competitive books: bid 5% above the current asking price. For an in-demand company, dozens of buyers are chasing the exact same block. Sellers routinely prioritize buyers they recognize or those who have established a track record of closing efficiently. If you are a new counterparty, sweetening your bid is the single most reliable mechanism to move you to the top of the list.

4. The Private Secondary Market Can Still Beat Waiting for Public Allocations. A common thesis among cautious investors was to bypass the secondary market and simply wait for an IPO or public listing. However, as we just saw, demand for top-tier tech names regularly outstrips supply. Many who waited were completely shut out of initial public allocations, leaving them to buy in the open market after a ~20% immediate bump. For those who completed transactions in the private secondary market even a few months prior to listing, the process was significantly more cost-effective.

5. Legal Restrictions on SPVs Remain a Paper Tiger. Despite persistent corporate warnings and posturing over the last several years, top-tier private issuers have not taken legal action to establish whether they can validly block SPV managers from selling individual underlying units within their funds. While companies increasingly assert these claims to maintain cap-table control, it remains a legal theory that has yet to be tested or enforced in a meaningful court precedent. Sophisticated managers continue to successfully navigate these transfer restrictions via structured fund units.