THIS fund's listing can give retail investors access to SpaceX, OpenAI, Anthropic and Anduril — Check details

Retail investors have a chance to own stakes in some of the biggest private artificial intelligence, defense and space companies including Elon Musk's SpaceX, ChatGPT-maker OpenAI, Anthropic PBC and Anduril Industries, through the public listing of Powerlaw Corp., Bloomberg reported.

The fund has over $1.2 billion in assets under management and disclosed plans to list, according to a regulatory filing with the United States Securities and Exchange Commission (SEC). It still needs approval form the US SEC before listing, it added.

Notably, the company is part of Powerlaw Capital Group, a platform run by San Francisco-based Akkadian Ventures that specialises in buying up shares in private companies from existing backers, the company statement added.

Chance to own stakes in banner private companies?

Individual US investors have been largely cut off from the exponential growth of companies like OpenAI, which has held recent talks to raise funds at a valuation of as much as $830 billion, up from less than $30 billion a few years ago. By the time companies like this list, much of their value would have already accrued to large venture capital firms or insiders. Powerlaw is part of a breed of new vehicles emerging to bridge that gap for so-called mom-and-pop investors.

“With the pool of capital in private markets, the best companies are not choosing to go public,” said John Spinale, managing partner of venture firm Jazz Venture Partners and an investor in Powerlaw Corp. “This robs the public the ability to access the high-growth firms.”

The fund’s name come from the power-law dynamics in venture investing, where a small number of companies have historically driven a disproportionate percentage of outcomes. It’s invested $355 million across 18 of the world’s most valuable private tech companies through secondary transactions. That’s included direct purchases, striking deals with employees to buy their shares, or banding together with other small investors in a special purpose vehicle.

The fund is opting for a direct listing, which means unlike a traditional IPO — where new shares are sold to raise capital— it will sell existing shares by current stockholders. Once the fund receives regulatory approval, investors can buy shares through a brokerage account on the open market, just like buying any other listed stock.

Risk factors to consider

The structure benefits Powerlaw Corp. as well — with fewer of these companies going public, venture capital investors and early backers haven’t been able to translate sky-high valuations on paper into a cash return. The company will gain access to a broader investor base through the listing and, if it performs well on the market, can raise new capital to deploy into its investments. It also plans to charge its shareholders a 2.5% management fee.

Risks include the tendency of closed-end investment companies, like the one planned by Powerlaw Corp., to trade at a discount to their net asset values. Meaning even if the portfolio is doing well, the share price might lag, the company said in its prospectus. It also warned that the private companies it invests in make limited information public and aren’t required to disclose detailed financial statements.

It marked its net asset value at about $475 million as of late last year, according to an SEC filing.

While most US retail investors have been historically prevented from investing in private markets — which usually requires wealth of more than $1 million or annual income of at least $200,000 — alternative asset managers have been pushing to open up access to private markets.

The bankruptcy of Linqto, an investment platform that allowed retail buyers to invest in unlisted companies highlighted the risks of private markets. The firm, which offered stakes in companies from SpaceX to Anthropic, set up special purpose vehicles to buy shares in the companies and then sold units in the SPV to its customers.

Powerlaw Corp. holds stakes in its portfolio companies via a mix of equity, convertible notes, SPVs and forward contracts.

“There’s a convergence of private assets and public markets. More people are trying to get exposure to private companies via public access vehicles, and there are pros and cons to each of the vehicles where you can do this,” James Seyffart, an analyst at Bloomberg Intelligence said.

(With inputs from Bloomberg)