Buying SpaceX Stock through an LLC

Google
dontbe3vil

Go to company page Google

dontbe3vil
Mar 19, 2021 14 Comments

I have an offer to purchase an interest in spacex. Unfortunately it is through an LLC which will hold the actual stock and I get stock in the LLC. It makes me uncomfortable to not directly own the stock and adds all sorts of extra risk- Wondering if anyone has gone through with a similar arrangement? #spacex #ipo

comments

Want to comment? LOG IN or SIGN UP
TOP 14 Comments
  • This is the only way to make private investment these days. It's actually a common arrangement. Warning: It is highly risky and not for everyone. Best to think that there is a possibility you may lose all this money.

    You need to be accredited investor (either $1M in bank not including the valuation of your house, or $200k in salary revenue/year, or $300k joint revenue with your spouse). Your qualifications need to be verified by the fund coordinator you are working with so they will have to vet you. You need to vet the reputation of the LLC as well to make sure you are not getting scammed.

    A few notes. You are basically investing into an investment fund. You don't technically "own" SpaceX stock, neither the LLC.

    SpaceX stock is not held by the LLC. SpaceX private stock is non-transferable - cannot be transferred until IPO. Can only be held by its (current/former) employees that got some RSU shares vested, or by some investors that actually participated in SpaceX investment rounds. Sometimes these people may want to get liquidity for some of these shares. Sometimes people have a child, new expenses, etc.

    So the SpaceX stock owners can made some contractual arrangement with private investment owners, which is basically an agreement that they will transfer this stock at the IPO time, in exchange for equivalent cash now. Important: They can change their mind at any time though (but then they need to pay back the LLC the amount of money they've received for the "agreement" plus some fees). This type of contractual deal is called is ROFR.

    Generally the LLC also adds a markup of around 15-25% to the stock on top of existing valuation. They offer no guarantees that the stock will be held until the IPO. The only thing going on in their favor is their reputation.

    https://en.wikipedia.org/wiki/Right_of_first_refusal
    Mar 20, 2021 2
    • SpaceX
      TestDummy

      Go to company page SpaceX

      TestDummy
      What this guy said. Stock is non transferrable and can't be assigned to an LLC
      Mar 20, 2021
    • yeah, if you're not an employee and not actually participating in an offer round as a venture capital limited partner (10MM+??)... Beware.

      I've checked some offers for leveraging my pre-IPO stock outside the buybacks and agree with JKWj76 - it's a bunch of contacts that avoid ROFR, and not a good deal for the holder either. A bunch of people will be gambling to "sell" you a paper contract.
      Mar 20, 2021
  • Smith & Associates / Sales
    One Bad

    Smith & Associates Sales

    One Bad
    You need a private equity lawyer
    Mar 19, 2021 0
  • Amazon
    Doraa

    Go to company page Amazon

    Doraa
    I liked to join LLC deal
    Mar 19, 2021 0
  • Google
    eGDp11

    Go to company page Google

    eGDp11
    This isn’t super common but it does happen. You need to make sure the owners of the underlying shares are legit ( as in rich+trustworthy enough they won’t back out of the sale when spacex is liquid)
    Mar 19, 2021 2
    • Google
      dontbe3vil

      Go to company page Google

      dontbe3vil
      OP
      interesting. My concern so far is largely about the company creating and managing the LLC - not sure how to vet them.
      Mar 19, 2021
    • Google
      eGDp11

      Go to company page Google

      eGDp11
      Presumably this is some company that specializes in secondary market transactions. You should ask about previous deals they have done. Secondary sales are very common, I’ve just not seen the LLC approach used
      Mar 19, 2021
  • SpaceX
    dfuh72

    Go to company page SpaceX

    dfuh72
    Sounds sketchy af
    Mar 19, 2021 0