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In March, entrepreneur Sohail Prasad setup a fund, Destiny Tech100, that holds shares in high-profile tech companies like SpaceX, Stripe and OpenAI. The fund was launched with the intent to enable public investors to reap the benefits of investing in these privately-held firms, which generally do not trade their shares openly.
However, the legality of the fund’s ownership of shares in Stripe and Plaid was questioned. Robinhood, the stock trading platform, stopped allowing investors to buy into the fund claiming it was mistakenly added to their app.
The current situation has stirred debates on the nature of the largely uncertain and enigmatic market of private company stocks, especially at a time where the secondary market for such shares is projected to hit a record $64 billion this year – a massive increase from $16 billion just a decade ago.
Several online marketplaces for trading private company stocks have spawned amidst the growing appetite for such shares. Funds like Destiny offer a rare opportunity for retail investors since most funds are limited to accredited investors with substantial income or net worth.
However, start-ups are wary of the increasing dispersion of their stocks among numerous shareholders, as it could lead to complications complying with securities laws, among other issues.
Online markets like Hiive, founded in 2022, are diving into the private stock trade, offering investors shares in emerging tech companies like Anthropic. Some investment funds too, such as Stack Capital, Fundrise, Private Shares Fund and ARK Invest’s ARK Venture Fund are promoting the potential to own shares in private start-ups.
Nevertheless, some start-ups, such as Stripe, have raised alarms over these stock offers, warning that investments not coming directly from the company are possibly scams.
Despite the questions and challenges around buying private company stocks, demand remains high for shares in these start-ups. Meanwhile, companies like Stripe and SpaceX, have started offering regular opportunities for their employees to sell a portion of their stock at a predefined price.
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