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
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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
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.