SpaceX Investor: “We Can’t Find An Exit!”
“Zach, our biggest challenge here is that there’s simply no way to exit!“
No, this wasn’t one of those “escape room” games where you try to solve clues to win the challenge.
This was a conversation with my new friend Chris — who has found himself trapped in an increasingly risky situation.
Fortunately for Chris, there’s help on the way.
And fortunately for you and me, that help could be very lucrative. That is, if you know how to jump in alongside Chris as new exit opportunities turn up…
A Private Problem Hindered By Regulations
I met my new friend Chris while doing work at Starbucks last week.
It all started when I heard him talking on the phone about Elon Musk and the SpaceX highly publicized rocket launch earlier this month. As it turned out, Chris is an investor in SpaceX and many other high-tech companies that are working on some amazing cutting edge projects.
You don’t normally just “bump into” investors in SpaceX at Starbucks.
That’s because SpaceX — and many of the other firms Chris is invested in — are private companies that are not listed on U.S. stock exchanges.
In order to buy a piece of these companies, you have to be invited to invest.
And by law, you must have a net worth in the tens of millions of dollars. So that narrows the playing field by a significant amount.
Chris works for a private equity investment firm that helps affluent investors find and invest in some of the hottest private companies. In particular, Chris focuses on firms developing new space technology — which is an intriguing and fast moving industry.
I could see the excitement in Chris’s eyes when he talked about some of the sci-fi sounding ideas that his companies were working on. But then when we started talking about numbers and the investment side of his business, that excitement turned into frustration.
“Many of the companies we’re investing in are finding huge breakthroughs…” Chris told me. “But even with these breakthroughs, it’s extremely challenging to find a way to sell part of our position and lock in a profit!”
In the past, investors like Chris would be able to lock in windfall profits when private companies listed shares on the New York Stock Exchange for regular investors like you and me to buy. This way, there would be a vibrant market for Chris and his investors to sell shares for lucrative profits.
“But today, no one wants to go public,” Chris said.
“There are too many regulations. It just doesn’t make sense! My companies would rather stay private forever than have to wade through all the red tape the SEC would throw at them.”
And that’s the sad truth… With today’s regulatory environment so strict, individual investors (who are supposed to be protected by these rules) are being shut out of exciting new opportunities. And private investors are less likely to help new startup companies because there is no exit available when they want to get out of their investment.
Fortunately, help is on the way.
A New Era of Lighter Regulations
If you’re like me, you don’t particularly appreciate the government telling you what you can and cannot invest in. I’d rather have the opportunity to make my own choices and determine how much risk — and how much potential return — I want from my investment opportunities.
That’s simply not the way it works today.
But the good news is that the Trump administration is appointing new regulators who have a natural bent toward free markets. In 2018, I expect many of the regulations that keep private companies from listing shares of stock to be done away with.
That could open up a brand new category of new market opportunities. And that’s great news for investors like you and I.
While we’ll probably have to wait a few quarters before companies like SpaceX or other cutting edge private tech companies list their shares, there IS a way to get started on this new trend today.
Right now, there are four private equity companies on my radar that should benefit from a reduction in financial red tape.
These private equity companies invest in firms like SpaceX (and many other private companies that are not listed on public markets). The private equity companies essentially manage mutual funds or hedge funds for wealthy investors. And the private equity companies charge lucrative fees to manage these funds.
You can’t invest in the funds these companies manage unless you’re an accredited investor.
But you CAN invest in shares of the private equity companies themselves.
This way, when regulations start to lift and private equity companies are able to sell some of their cutting edge investments for a profit, you’ll benefit right alongside!
The four companies on my radar right now are The Blackstone Group (BX), KKR & Co. (KKR), The Carlyle Group (CG) and Ares Management (ARES).
All four of these firms invest in off-market opportunities. And all four should benefit when it becomes easier for the companies they invest in to list shares on public markets.
So by purchasing shares of the private equity managers above, you’re tapping into a lucrative industry that is poised to find an exit for many of its greatest investment opportunities.
I’ll be watching this area closely and will keep you posted on new developments along the way.
Here’s to growing and protecting your wealth!