Benzinga - by Neil Dennis, Benzinga Staff Writer.
If SpaceX were to go public next week it would command a valuation of somewhere in the region of $175 billion and likely have institutional and private investors clamoring for a slice of the initial public offering.
That heady valuation is based on sales of insider shares sold on the secondary market and would immediately thrust Spacex into a market cap position alongside tech veterans such as Intel Corporation (NASDAQ:INTC) and IBM (NYSE:IBM).
SpaceX, partially owned by Elon Musk, hasn’t set a timetable for going public, but rumors and scams have abounded, while the company has tantalized investors with the prospect of floating Starlink, SpaceX’s satellite division.
But if private investors want a slice of SpaceX right now, it is possible — through the publicly traded private equity (PE) companies that hold shares.
One such PE firm is Stack Capital (TSX:STCK), a Toronto-listed company, headed by CEO Jeff Parks.
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Parks told Benzinga in an interview: “We want to democratize access into growth in late-stage businesses.”
The company’s portfolio aside from SpaceX, includes holdings in warehouse automation company Locus Robotics, travel and leisure operators Hopper and Omio and e-commerce group Bolt.
“We’re trying to get you those companies in the private market before they go to initial public offerings,” says Parks.
“You can see out there in the public market companies like Reddit Inc (NYSE:RDDT) and Astera Labs Inc (NASDAQ:ALAB) and it’s always nice to get an allocation on one of those on an IPO.
“But that’s really hard to do, so investors can get exposure to these companies, pre-IPO, by backdooring into us, being publicly listed on an exchange.”
No Shortage Of Capital For SpaceX Parks says that there’s always a lot of private capital for blue-chip companies such SpaceX and Stripe.
He adds: “Those companies are just rock solid and there’s just so much capital on the sidelines needing a home — there’s huge demand for these businesses”
And they’ve been able to stay private for such a long time because they can get all the money they need in the private market. But, Parks believes that eventually it makes sense for large companies to go private.
“They can carry on doing tender offers for so long, but at some point they need to come public, so I think we’re going to see a barrage of companies come public down the line.”
Where is the IPO market? But currently the IPO market remains sluggish. Following a record year in 2021, the market for new listings cooled dramatically. The Covid-19 pandemic-driven consumer blowout drove inflation higher, pushing up interest rates and causing some market volatility.
“Recently we saw Birkenstock Holding Ltd (NYSE:BIRK), Klayvio Inc (NYSE:KVYO) and Instacart (NASDAQ:CART) come out and they didn’t trade really well, you didn’t see those huge price pops that investors get excited about.
“But now in the last two weeks you’ve seen ALAB be the first real artificial intelligence business go public and it’s done extremely well. Same thing with Reddit — which was private for such a long time and then received really well by the public,” says Parks.
He explains that the RDDT and ALAB listings should act as a nice barometer for the IPO market,
“You’re going to see a wave of new issues come in and really fire up that Wall Street engine again.
People are getting excited about getting access to these companies that have been private for a long time so I think you’re going to see a lot of companies say: ‘Hey, they worked. Let’s bring our company public.’ They’ve been waiting a long time.”
Valuations In The Private Market As noted with SpaceX, it’s not just the mega-caps of the public market that facing lofty valuations. For the blue-chips of the private market, there’s a lot of private capital being made available. Valuations here are looking robust, too.
“There’s some really good deals out there because companies need capital and it’s really picked up since the recent spate of IPOs, because they’re seeing the private market as a source of liquidity that can get them to a position where they can make the move towards going public,” Parks says.
He concludes: “If you’re not a blue-chip company it’s harder to raise that underlying capital. But for the blue-chip guys, you should see the demand on some of these deals — we’re talking multi-billion dollars moving in the secondary market.”
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