By Zach Scheidt
This post SpaceX Investor: “We Can’t Find An Exit!” appeared first on Daily Reckoning.
“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 …read more
Source:: Daily Reckoning feed
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