Dear Subscriber,

By Chris Graebe

Elon Musk has had a toe — or more — in the crypto world for a while.

Dogecoin (DOGE, “C+”), for example, is one of the biggest memecoins around. And it owes quite a bit of its success to Musk’s endorsements. 

Now, though, one of his companies, SpaceX, has entered the blockchain. 

By joining the RWA revolution, SpaceX has opened the doors to allow average investors to get access to its success for the first time. 

That’s because until now, there hasn’t been a good way for people like you or me to buy in.

SpaceX: Out of Reach for Retail Investors

Musk launched SpaceX in 2002. Over its lifespan, it’s managed to cut the cost of sending a kilogram into orbit by 90%.

SpaceX is one of the government’s first calls when it needs a “boost.”

Not only does it launch its own space missions. But national space programs use its rockets, spacecraft and even crew members. 

Currently, SpaceX is valued at about $350 billion. That’s about the same as Weiss “Buy”-rated stocks like Bank of America (BAC), Palantir (PLTR) and German enterprise software company SAP (SAP ).

In other words, …

SpaceX has all the makings of a hot investment. There’s just one problem.

It isn’t public yet. It’s relied on raising capital from private equity, funds and wealthy investors over the years. 

There are two TradFi ways you could use to get exposure, but neither is ideal. 

One option is to buy shares through a marketplace such as EquityZen, which I’ve written about previously. 

Even if you can get your hands on some shares, it takes a minimum $5,000 commitment to buy on that platform.

The second option is to consider a fund, such as the ERShares Crossover ETF (XOVR), that holds shares of SpaceX. 

However, that means investors must buy a basket of other companies to get access to SpaceX.

Thanks to crypto and blockchain technology, though, there is a less-known third way investors can get access.

A Tokenized Take on SpaceX

My colleague Mark Gough has written a lot about the real-world asset narrative. 

According to him, this fusion of TradFi and DeFi “creates a new, more inclusive and efficient financial paradigm.” 

And he’s not alone in this assessment. 

Back in March, BlackRock launched the first tokenized fund issued on a public blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) on the Ethereum (ETH, “A-”) network. 

BlackRock’s involvement in this relatively new sector of crypto is a huge vote of confidence. And the fund recently reached over $3 billion in assets under management.

“Tokenization of securities could fundamentally transform capital markets,” says Carlos Domingo, the cofounder and CEO of Securitize, BlackRock’s partner in operating the BUIDL fund. 

He says that the launch of BUIDL “demonstrates that traditional financial products are being made more accessible through digitization.”

And as someone who comes from the startup space, I can see what he means! 

SpaceX shares are the latest asset to join this movement through the token rSpaceX. 

Hosted on the Republic crowdfunding portal, the idea behind a tokenized asset is simple: If SpaceX goes up in value, then the value of the token should rise in step.

Republic describes this new product as a “mirror token” to reflect those changing values.

The minimum investment is $50. But with tokens at $1 each, that means if you join the waitlist on Republic, your minimum buy would get you 50 tokens right off the bat.

That is definitely far more accessible and (in theory) gives you far more value than the alternatives I listed above!

But while I am all for new opportunities for private-equity investors, this idea may be too good to be true. 

A Leap for Mankind, or a Step Back for Investors?

If you’ve been around the DeFi block before, you’ll know that there are a few setbacks to decentralization.

And a big one is how asset prices can vary from marketplace to marketplace. 

And that’s for assets that only exist on the blockchain. 

When it comes to tokenized real-world assets, this setback can balloon into a substantial issue for investors.  

The Wall Street Journal reported that other tokens designed to track the price of TradFi shares have deviated wildly from the underlying price. 

On July 5, for example, AMZNX — which is meant to track the price of Amazon — recently traded four times the stock’s closing price. 

 

I can easily see this issue compounding with rSpaceX because its underlying shares are not publicly traded.

That means you can’t get daily pricing the way you can for any stock on the S&P 500 or Nasdaq. And privately held shares trade hands far less frequently. 

The best grasp investors like you and I can get on SpaceX’s value is when the company goes to raise more capital.

This discrepancy can have a big impact in your investment. 

Republic’s rSpaceX token will be valued based on a $225-$275 share price. But recent transactions on the secondary markets have occurred at a price of $185.

That means the token may already be as overvalued as 48.6%! 

That doesn’t give investors much upside potential unless SpaceX’s value substantially increases over the next year.

So, what’s the worst-case scenario with tokenized SpaceX shares?

You buy the rSpaceX token for $275. Then, you’re left holding the bag for a year while actual SpaceX shares appreciate from their recent price of $185. 

Why a year? 

Because buried in Republic’s fine print is a one-year lockup period. 

That means you are locked into owning that token, no matter what happens to its value, for one year.

Plus, a lockup period typically creates a massive rush for the exit when it ends. 

That’s another strike against buying this tokenization offering.

A Warning About Today’s Tokenization

More to the point, the issue I have with today’s tokenization is the lack of actual ownership.

rSpaceX tokens aren’t non-fungible tokens (NFTs). So, they don’t guarantee ownership. 

In short, investors who go the tokenized route won’t get actual shares of SpaceX when they invest. 

They’ll get an IOU coin. 

It’s a representation of value which may not amount to anything at all in the end.

Even if the value of rSpaceX matches the value of SpaceX shares — which is an if at this point — you may not have the benefits of actual ownership.

You’ll just be along for the ride.

That, combined with the red flags I laid out earlier, is why I don’t like this deal structure. 

If you’re interested in SpaceX, you may be better off paying up for SpaceX shares on the private market. 

Or you can try buying some of today’s tech funds that hold a position in SpaceX. XOVR is one. The ARK Venture Fund (ARKVX) is another. 

Just keep in mind that isn’t a pure play on SpaceX. And neither fund gets a good Weiss rating. So, keep that in mind.

A Better Way

I’m always excited to see changes that enable more opportunities for average folks to tap into the private market.

Secondary marketplaces and tokenized assets may very well become more liquid in time. 

But for my money, there’s a better way to get into companies before they go public.

In fact, I have one such opportunity in my sights right now. 

On Tuesday, July 22, I’m hosting a Private Investment Summit.

There, I plan to tell you more about this little-known company that’s set to disrupt one of the most lucrative industries on earth. 

This event is for regular people who want to get into private, pre-IPO companies.

If that’s you, join me on July 22 at 2 p.m. 

I’ll reveal exactly how and WHY you should consider claiming an early stake while it’s still private.

Successful deals in this sector offered returns as high as 900% ... 19,942% … 53,423% and more.

I expect seats to go fast. So don’t wait. Click here to reserve your spot today.

Happy hunting!
Chris Graebe