An investor in Space Exploration Technologies, better known as SpaceX, figures it has a growing profit from Elon Musk’s space-launch and satellite-internet company.
Destiny Tech100, which is working toward becoming an exchange-traded fund with a portfolio of 100 venture-backed private tech firms, said its SpaceX investment had a fair value of $14,473,345 at the end of 2022, according to a form it filed with the Securities and Exchange Commission earlier this month. That is up from $14,206,276 as of Sept. 30.
Destiny Tech100 had originally invested $14,018,608 in SpaceX common shares in June 2022. Its paper profit on SpaceX rose to $454,737 at Dec. 31 from $187,668 as of Sept. 30.
Destiny Tech100 Chairman and CEO Sohail Prasad declined to comment for this article, saying the company is in a quiet period. Prasad is also founder, co-chairman, and CEO of Destiny XYZ, which controls the investment advisor of Destiny Tech100.
How is the fair value of nonpublic stock determined? There are platforms where SpaceX stock is traded, but Destiny Tech100 might not use such quotations. The company’s filings say, “[w]hen market quotations are not readily available or are believed by the Adviser to be unreliable,” it determines fair value in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification 820, and Rule 2a-5 under the 1940 Act, which provides guidance…to determine fair value of fund investments in good faith.”
SpaceX is Destiny Tech100’s largest individual investment, and one of two that showed a paper profit as of the end of 2022. Out of 24 individual investments, 18 were valued at less than their cost, and four were flat.
The other investment that had a paper profit was an Axiom Space convertible note that was valued at $3,634,867 as of Dec. 31, compared with a cost of investment of $3,090,000. The Axiom investment had been valued at $3,000,000 as of Sept. 30.
The company, based in Houston, provides private flights to the International Space Station. It is building its own facility in orbit.
Destiny Tech100 invested a total of $78,854,778 in privately held tech companies in 2021 and 2022. The fair value of those investments stood at $49,604,108 at the end of 2022, a 37% drop.
In October 2021, Prasad told The Wall Street Journal that the performance of late-stage tech startups was compelling, noting that Destiny XYZ had raised $100 million for Destiny Tech 100 investments.
But that was when the market was still upbeat on new tech companies, and before the Federal Reserve raised interest rates in 10 consecutive policy-setting meetings in an effort to combat inflation. The drop in the fair value of Destiny Tech100’s portfolio may reflect a loss of investor appetite for unprofitable growth companies that have recently gone public, many through mergers with special-purpose acquisition companies, or SPACs. Higher interest rates reduce the current discounted value of future earnings, and is particularly tough on startups that are years away from making money.
Prasad is also a co-founder of
Forge Global Holdings
(FRGE), a private exchange that went public last year through a merger with a SPAC. Shares closed at $16.15 on March 22, 2022, their first trading day. They closed on Friday at $1.83.
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.
Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.
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