This April 23 article has been amended to correct the date for the sale of shares to April 12 and not April 16.
In recent weeks, a new fund which allows investors to access privately-owned technology companies sent many investors into a frenzy. Morningstar as well as competitor ARK Investment Management have also criticised the scheme.
Shares of Destiny Tech100
(DXYZ.N), opens new tab The fund’s shares are now up 200% from the date of its launch on March 27, following a turbulent three-week period that saw it soar by 1,172% since its $8.25 debut price. Shares of the fund closed down Monday by 13.1% to $24.68.
It owns shares in 25 technology companies and startups, such as SpaceX, OpenAI and Instacart, and the online payment processor Stripe. The fund plans to review its portfolio on a quarterly base, with the creator Sohail prasad saying last month that it would eventually like to hold 100 companies.
A market cap of $276.46 millions is currently recorded. It filed with SEC last week for secondary stock sales of new shares up to $1 billion.
The Destiny Tech100 fund is not the first of its kind. However, it has caught the attention of meme stocks, which have caused wild swings in the shares of GameStop and more recent companies such as Trump Media & Technology Group.
Prasad launched DestinyTech100 in 2021 with the aim of providing a diversified list of pre-IPO firms that is usually only available to high net worth investors.
He said, “These companies are ones that the public knows and loves and uses in their everyday lives. But they can’t afford to invest unless you’re rich.”
According to a SEC document, Prasad’s fully owned Destiny XYZ Inc. which controls the advisory firm of the fund, sold 200,000 of its shares on April 12, at a cost of $24.65, on the day that the fund submitted a filing for a second offering.
Ethan Silver said that the proceeds will be used to develop products to bridge the gap between the public and private market. According to the SEC, Prasad’s Destiny XYZ owns 1,08 million shares.
The fund’s shares hit their 52-week peak of $105 per share on the 8th of April.
Cathie Wood’s firm, ARK Investment Management has offered products similar to the ARK Venture Fund. The ARK Venture Fund was launched in September 2022, but investors have been reluctant to invest. As a result, they are paying more for ownership than initially estimated.
ARK offer waivers or reimbursements for these fees. The fund’s assets now total $53.7 millions.
According to the SEC filing, Destiny Tech100 charges an estimated fee of 4.98 percent.
Wood told Reuters that the structure of rival funds and their fees means investors will pay “a higher price” for daily liquidity.
In a letter to investors last week, ARK argued that its pre-IPO investment approach is superior to Destiny Tech 100, claiming it provides a price for shares closer to their net asset value and allows shareholders to redeem up to 5% quarterly of total fund assets.
In an emailed reply to the ARK criticism, Prasad said: “We think liquidity is most important.” He added that “we have made it easy” for investors by allowing them to purchase and sell DXYZ shares via their current brokerage platforms.
Prasad said that he appreciated that ARK’s comments had helped to educate investors on the concept.
It’s great to see yet another innovative firm trying to push innovation and forward progress.
Morningstar published its criticisms last week of Destiny Tech100, addressing some of the issues raised by ARK.
Jack Shannon, Morningstar’s senior research manager, stated in a recent report that investors would do well to remain on the sidelines, given the structure of the fund. The massive premium on Destiny Tech100 represents an opportunity for investors who want to make money at others’ expense.
Prasad refused to comment on Morningstar’s rating.
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The report was written by Suzanne McGee. Additional reporting in London by Dhara Raasinghe; editing by Ira Iosebashvili and Michael Erman.
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