Ahead Of SpaceX’s Public Issue, Companies Are Offering Pre-IPO Shares Shares: Explained

Companies such as SpaceX, OpenAI and Anthropic are set to launch their public issues this year. A growing market of shadowy firms and individuals is promising investors they can buy private shares of the firms even before their initial public offering.


Firms like Texas-based Augment find and package pre-IPO shares for sale to retail and institutional investors who otherwise can't buy them, as per Forbes. Augment president Adam Crawley told the outlet that the firm's assets are almost entirely pre-IPO shares in private tech companies like Anthropic.


Augment is not the only such firm. Investors across the world are seeking access to special purpose vehicles (SPV) to hold shares in coveted firms even before their IPOs have launched. Companies have also offered pre-IPO shares of Anthropic and OpenAI, two more tech giants that are yet to hold a public issue.


What Are SPVs And How Do They Work?

Ideally, it is a tactic that allows a group of investors to pool cash and directly invest in a startup, as per Bloomberg. The scheme allows investors who can't commit enough cash on their own to put money alongside a sovereign wealth fund or venture capital giant on a cap table. By outsourcing outreach, SPVs help companies manage relationships with a few bigger investors rather than several small ones, without saying no to any funders.


However, the market operates in a shadowy area; often SPV investors have no easy way to verify whether a fund manager has a relationship with the companies they claim to back. Not just that, in the case of perpetual future contracts offered by cryptocurrency firms like Binance, investors don't own shares in SpaceX; they just allow speculation about what the market price could be.


This hasn't stopped SPVs from becoming an investment tool. The funds invested in the vehicles has grown 11 times since 2021, accounting for almost half the  quarterly transaction volume tracked by  data provider and operator Caplight Technologies, according to Bloomberg.


The move prompted Anthropic to issue a note on its website, stating that its both its “preferred stock and common stock are subject to transfer restrictions”, meaning any sale or transfer that does not have the approval of the firm's Board of Directors is “void” and will not be recognised.


The company targeted firms offering pre-IPO shares like Hiive in its note. The Claude maker also explained that it does not allow special purpose vehicles) to acquire its shares and any stock transfer to an SPV is also considered void.  


While Anthropic's move rattled many investors, the impending IPOs of firms like SpaceX means that SPVs will continue to get backing from investors.