26 ms·
JPMorgan to trade shares of pre-IPO giants including SpaceX, Robinhood, Airbnb
- OJFord 6y agoDoesn't really explain the mechanics - is JPM to pick pre-IPO companies it expects to have a high volume of interest, and then take a commission for selling & repurchasing (i.e. market-making) the shares OTC?
- ferros 6y agoI wonder if this will make it easier to build up larger pre-IPO positions.
- WrtCdEvrydy 6y agoThat's a good question, if it's a pre-IPO, how did they get shares? Are you just buying/selling paper versions of the stock and they'll buy your shares an IPO goes live?
- sonicggg 6y agoYou can already invest in pre-IPO companies, at least indirectly. Some holdings offer exposure to them, but you won't get to be very picky.
- etaioinshrdlu 6y agoCan you point out a few?
- jimmySixDOF 6y agoeQuityzen is one They offer the holder of any pre ipo shares a chance to monetize early, though I have no idea how they smooth out all the various terms and conditions involved
- echelon 6y agoIs this legit? What are the risks here? I'm off to buy some SpaceX if this is a legitimate way of doing so.
- etaioinshrdlu 6y agoYou’d need to be an accredited investor for one. Which does seem silly from a high level point of view, there are infinitely riskier investments that you don’t need accreditation for.
- ericd 6y agoIt’s subject to share availability and purchase minimums, in addition to the accreditation requirement. The availability of SpaceX stock is not great afaict, the demand is incredibly high. It’s to the point where some of the platforms are charging carry in addition to their normal upfront fee, for a fund that invests in just SpaceX, because they can. But yeah, EquityZen is a solid platform, and their minimums tend to be a lot more reasonable than some of the others ($10-20k vs 100k+)
- 6y ago
- lvs 6y agoPerfect for the investor who doesn't fret about pesky things like financial filings.
- alex_young 6y agoWon’t this force them to go public? Too many shareholders?
- ceejayoz 6y agoI suspect they own the shares, and you own a fund that is made up of those shares. I own a Vanguard index fund instead of individual shares, for example. I don’t get to vote in shareholder meetings and whatnot.
- repsilat 6y agoAs I understand it, you technically never get forced to go public -- you just get forced into reporting as if you're a publicly traded company. At which point most companies figure they might as well.
- phyalow 6y agoEquity Swaps. You will own a derivative not the underlying.
- neximo64 6y agoJPN can hold them as nominee
- crmd 6y agoYou can get around that with a performance-linked note. The bank owns the equity and issues a note whose value is explicitly linked to the valuation of the underlying stock.
- vlovich123 6y agoI feel like that’s a distinction created just to let bankers skirt rules. Like what Carl Icahn and Soros did which by any sane rule book would be insanely illegal.
- globular-toast 6y agoYou are now qualified to be a banker.
- ferros 6y agoMy other question is will this make pre-IPO sales fairer? If historically sales have been over the phone there is the chance people are getting deals based on relationships or priority access. You could make the case that this will make the process more transparent.
- xwdv 6y agoSpaceX is the one to get. It’s the next Tesla once starlink is fully operational.
- thoughtstheseus 6y agoThey’ve already announced an intention to spinoff that business line.
- bpodgursky 6y agoAlmost certainly with a controlling share held by SpaceX proper. Owning SpaceX will still be a strong play on starlink. They aren't going to just sell it off for chump change.
- Answerawake 6y agoWas there a particular reason?
- perlgeek 6y agoBeing an ISP and being a launch company are very different business models, different regulations apply, different operational expertise is required and so on. If you're focused on getting to humans to Mars, running an ISP is a distraction, even if it comes with good cash flow. If you're running an ISP, getting to Mars is a distraction. It's better to separate thees two aspects into separate companies.
- nickik 6y agoThis is wrong. Shotwell said once that they maybe do it. But Elon is clearly against it. Go check out the interview at the Airforce conference.
- marvin 6y agoTheir market cap is currently 20X what Tesla's was when they IPOed, though. The biggest growth phase (in terms of percentages, likelihoods, risk) is behind them. What JPM is trying to do here, is really just extending the point where relatively normal people can buy their stock slightly downwards on the growth curve, slightly closer to the end of the hockey stick. Sarbanes-Oxley and the whole accredited investor situation is really a big shame when it comes to having an even remotely level playing field for long-term speculative investments. Except in very rare cases, where the public markets were the only option for getting enough capital fast, IPOs currently serve more as a dumping ground for companies that have finished most of their growth. Index funds that don't care much can take over from there. Okay, it's harder to get scammed, but you lose the ability to invest in the biggest growth companies along with that.
- deleted 6y ago[deleted]
- switch11 6y agoIsn't there a rule that more than a certain number of share holders -> Must go public This: alex_young 14 minutes ago [–] Won’t this force them to go public? Too many shareholders? reply How can they skirt around these rules?
- SMAAART 6y agoNot exactly. Once a company have >500 shareholders they have to do some periodic SEC filings similar to publicly traded companies, but their share are not publicly traded, so they are not "public" companies.
- vmception 6y agoIts 2,000 now And of course people typically then list their shares since they have all the same headaches of reporting, but also get the benefits of liquidity when listed
- ShorsHammer 6y ago> How can they skirt around these rules? > JPMorgan The answer is in the headline. Technically, the shares will probably be held in a trust.
- btian 6y agoThat's not true in the US. As long as the company is a C Corp, which all these companies are.
- smabie 6y agoJPM can sell equity swaps and just hold all the shares themself.
- sjg007 6y agoI mean this is just like in app currency backed by a token backed by a dollar. Maybe it provides a fairer 409A.. maybe. It’s basically a second derivative. Problem is you don’t see the function itself.
- shmerl 6y agoWhat does it mean trading private shares? Isn't it the property of public companies?
- destitude 6y agoEmployees of companies that are not public but who are given stock options have no way to easily liquidate those options. This allows those employees to get some money NOW instead of hoping someday the company goes public or is bought out (which in most cases will never happen). For the buyer this allows them to get in even earlier. This is complicated of course by the fact they are not public companies and requires a lot of extra paperwork.
- choppaface 6y agoBoth Uber and Facebook traded higher on second market during the 6 months prior to IPO, and then the share price fell after the first week or two. Facebook I remember had deals closing at $45-$50 and then they priced at $38. While diversifying might help, the greatest return with 1 year of purchase might entail selling during the IPO pop... at least that held for Uber and Facebook. If you buy into one of these notes, aren’t the shares likely held as part of a 6 month lock-up? Or would JPM liquidate you as part of the IPO? Wonder if we would see dark pools doing derivatives of these holdings (similar to how credit swap contracts were trade during the financial crisis). That would be the most likely place you could 10x or 100x an investment on a late-stage company like Airbnb, and you might even convince people like Softbank to play?
- curiousgal 6y ago> ses dark pools I thought the point of dark pools is so you don't see what's being traded inside.
- andylynch 6y agoNot exactly- dark pools print and report trades like exchanges, the difference is that the order book isn’t displayed, i.e there’s less information about live orders.
- curiousgal 6y agoInteresting, thanks you.
- gorgoiler 6y agoThis feels weird. Almost like it’s a rule of law issue that’s at stake when regulations and regulators get left behind.
- SpicyLemonZest 6y agoI guess it's not obvious to me that regulations are needed here. JP Morgan and its clients are sophisticated investors, so I'm not sure they need Congress's help to protect themselves from SpaceX and Robinhood.
- tempsy 6y agoit just sounds like a competitor to sharespost or forge or any other secondary exchange? what’s different
- perlgeek 6y agoStock trading is complicated because those companies aren't public yet, but they aren't public (yet). I think I recall Elon Musk saying that SpaceX isn't going to go public, possibly because it's a very long-term endeavor, and his goal is to go to Mars, not make huge profits. So, there's clearly a problem there. Companies don't want to go public to avoid the incentives of the public market, but they also want their stocks to be traded. One possible approach is the Long Term Stock Exchange which we've discussed a few days ago. One of their goals is to provide liquidity to early employees and other long-term shareholders without necessarily shifting the focus to the quarterly numbers. I don't know how well they'll achieve that, but I'm really curious. What would be other solutions?
- damieng 6y agoSpaceX do internal stock buy-backs based on continual fair market valuations.
- andruby 6y agoHow is “fair market” valuation determined for non-public companies?
- nopzor 6y agobased on various inputs, primarily things like the valuation of recent fund raises, looking at publicly traded comparable companies, discounted cash flow analysis, etc.
- dmitriid 6y agoIn other words: reading tea leaves
- abdullahkhalids 6y agoAs long as those algorithms are consistent over time, then for the purpose of employee stocks, doesn't seem like a big problem.
- WanderPanda 6y agoThe sheer amount of money looking for opportunities we have in this stage of the long term cycle is really a pity for small / private investors. Not even the worst companies need capital from the public markets...
- deleted 6y ago[deleted]
- tehabe 6y agoI wonder if this is a strategy to make them go public if they want or not.
- deleted 6y ago[deleted]
- jt2190 6y ago> The market for trading private company stock is dominated mostly by boutique brokerages based on the West Coast with names like EquityZen, SharesPost and Forge. > Berthe said he believes that New York-based JPMorgan is the first major Wall Street bank to create a team dedicated to trading private shares. People with knowledge of the operations of Goldman Sachs and Morgan Stanley said that while the firms don’t have dedicated teams, they have been facilitating trades in this market for years. In particular, Morgan Stanley last year acquired Solium, a leading manager of corporate stock plans, giving it access to a wide swath of start-up equity. > Unlike shares in public companies like Microsoft, trading in private company stock is complicated and still mostly the domain of old-school voice trading, versus electronic exchanges that close transactions in seconds. Once a trade is negotiated, JPMorgan has to transfer legal ownership of contracts and get clearance from the start-up, a process that can take weeks.
- jessriedel 6y agoSpaceX is listed on EquityZen, but no shares are available. I suspect there is very low liquidity for most of these companies, a problem JPMorgan could potentially reduce.
- animationwill 6y agoIf I wanted to do this, are there certain fee-based lawyers that I can hire to read the document? What should I look for? By the SEC definition, I am a qualified investor but this would be the first such investment I'd make and I don't want to mess up
- j_crick 6y agoHow this is not a set of ICO-like schemes, flavored with that particular 2017 style, is kinda beyond me.