2019 is the year of the unicorn IPO. Many of the world’s best known, large tech companies are going public and offering their shares to retail investors for the first time. As you purchase these new shares, you might be wondering, what the return could have been had you invested in the company when it was still private?
If you aren’t well versed in private equity investing you might not be aware that private equity does not play by the same rules as public shares. Private shares, unlike public ones can be very difficult for the ordinary person to access. Although it is theoretically possible for a retail investor to invest in private companies, such as during a friends and family round, it is very difficult, or even impossible for ordinary investors to buy private shares in large pre-IPO tech companies. These high-demand companies tend to be very selective about who they sell shares to, and the secondary markets requires hundreds of thousands of dollars at a minimum to buy shares from an existing investor and be added to the company’s cap table.
Why is investing in large private companies so difficult? At this stage in the company’s development companies tend to be looking for investors with a strong reputation that will enhance their brand. Furthermore, in the United States, if a private company has more than 499 investors, they reach the 500 Shareholder threshold and they are required to start providing the same costly reports as a public company. Therefore, to avoid being subject to costly reporting requirements, private companies, try to keep their shareholder number fairly low.
Despite these challenges, there are still many private investors that might want to sell their shares before the company goes public. To address this need, secondary markets have emerged that allow investors to sign a contract for profit of shares, a legal contracts that entitle the buyer to all economic interest of the private shares, without requiring the company to update their cap table. This ensures that the company is able to retain the investors that they approve on their cap table, while providing liquidity to their shareholders. However, even in these secondary markets minimum investments tend to start at $20,000 due to the overhead of setting up these deals.
Ambisafe, a technology company with a mission to democratize financial markets by building capital markets infrastructure on the blockchain, is increasing accessibility to private equity through a new form of tokens. USPX, Ambisafe’s first pre-IPO token, represents shares in their Unicorns LP fund, a fund that will sign a contract for profit of shares with a private shareholder of SpaceX shares. The method is pretty simple. A SpaceX shareholder decides they want to sell their shares. Ambisafe, in partnership with US Capital Global, a well known US-based investment bank, purchases those shares into their fund Unicorn equities LP. The fund then issues shares onto the blockchain.
USPX, Ambisafe’s first pre-IPO offering has a minimum investment of under $100, making it affordable to most investors. 10 USPX tokens will represent economic interest of 1 SpaceX share. After the token sale, token buyers will be able to trade their tokens freely on the secondary market. Should SpaceX go public, token holders will receive a liquidation event, receiving funds equal to their tokens in a stable coin.
Ambisafe’s founder, Andrii Zamovskiy is extremely bullish on the project. “Elon Musk is truly a visionary. He is not afraid to pursue difficult projects that will meet the future needs of humanity. Where others would say that is impossible, he sits down and maps out how to make the impossible, possible. Over the last 10 years SpaceX’s valuation has seen steady growth, so I feel it is an asset that many investors globally would be excited to hold. The goal with these pre-IPO offerings is to provide access to pre-IPO unicorns that have shown real traction, but that are not going to IPO tomorrow. This allows investors to see the price of their token increases with each new round of funding before the liquidation event.” Andrii Zamovskiy, founder at Ambisafe.
“SpaceX” is a registered® trademark of its respective holder Space Exploration Technologies Corp. (referred to herein as “SpaceX”). Any reference to SpaceX in this press release is made for general informational purposes only and does not constitute an endorsement or affiliation by Space Exploration Technologies Corp. This article does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the USPX tokens in any jurisdiction in which such offer, solicitation or sale would be unlawful.