SpaceX SPV investors lose $300K as 900M shares unlock

Ram Rupireddy invested $17,250 in a Late Stage Management SPV for SpaceX exposure in 2020. After the June IPO at $135, he was told his shares sold in 2024 for $45,450, not $300,000.

"This has to be the most talked-about lockup in the history of IPO lockups," said Robert Hackel, CEO of institutional brokerage R.F. Lafferty & Co., who has been fielding calls from pre-IPO investors eager to sell SpaceX stakes and rotate into Anthropic, OpenAI and Anduril Industries.

As many as 912 million shares — more than double the current public float — become eligible for sale Thursday. A staggered schedule frees an additional 12.9 billion shares by mid-2027. SpaceX shares have slumped 49 percent from their June high, trading near $108 after a 13 percent drop Wednesday despite a 92 percent jump in second-quarter revenue.

The lockup expiry and the SPV fraud together expose systemic risks in the pre-IPO investment market, where vehicles marketed to accredited investors operate with minimal regulatory oversight. Bankers estimate at least 1,000 SPVs hold SpaceX stock alone, and Thursday's unlock will test whether early backers hold or cash out.

The Late Stage collapse

Rupireddy, a data engineer in Ashburn, Virginia, learned about Late Stage Management through a friend in 2020. The firm sold "exposure" to SpaceX shares through special-purpose vehicles — funds that pool investor money to buy stakes in private companies, often through multiple intermediary layers. Rupireddy wired $17,250 in November 2020, when SpaceX was valued at $58 billion.

Three Late Stage executives — Raymond John Pirrello Jr., Joseph Passalaqua and Robert Cassino — pleaded guilty in March to defrauding investors through hidden markups and fees. They face maximum sentences of 20 to 45 years. A separate class-action lawsuit alleges Late Stage and Bahamas-based Capital Truth added hidden markup fees for pre-IPO shares.

After the IPO, Rupireddy's portal showed his SpaceX position had been sold on Dec. 31, 2024. Late Stage later said the sale occurred in September 2024 at roughly $105 per share pre-split, before a 5-1 stock split. His 2025 tax document and May 2026 portal still listed the position. He has filed a complaint with the SEC; an FBI special agent joined an SEC call with another investor in July.

SPVs have grown more popular as high-profile startups stayed private longer, with venture firms using them to tap individual investors for capital. The vehicles often charge placement or management fees of up to 5 percent plus performance fees of 20 percent or more. They aren't required to file audited financials with the SEC or obtain approval before raising money.

Lockup test

The first lockup expiry could more than triple SpaceX's public float if a price-based early-release provision is triggered. CEO Elon Musk, who owns about 42 percent of the company, is barred from selling until one year after the IPO under a separate agreement. Executive officers face longer lockups that generally don't begin to expire until after fourth-quarter results.

Early backers including Founders Fund, Craft Ventures, Valor Equity Fund and Alphabet hold stakes acquired at a fraction of the $135 IPO price. "They're long-term believers in SpaceX," said Gabriel Shahin, founder of Falcon Wealth Planning, who has been tapping contacts among SpaceX insiders. But he acknowledged each upcoming lockup expiry is likely to make trading more turbulent, with options prices reaching levels he called "sheer insanity."

SpaceX employees and early investors are "sitting on such massive gains that they'll have a very strong incentive to realize a return and diversify their holdings," said Matt Kennedy, senior strategist at Renaissance Capital. The selloff after earnings "seems more sentiment driven, as media reports are that many insiders will look to sell on the strong results this week as their shares become fully vested," said Brian Mulberry, chief market strategist at Zacks Investment Management.

The SPV market's opacity extends beyond Late Stage. Anthropic, expected to IPO this fall, recently updated its website to say it won't recognize sales of its stock that haven't been approved by its board, calling out online platforms reselling interests through SPVs. At least two brokerages are still marketing Anthropic exposure via SPVs, according to emails reviewed by the Journal.

This article is for informational purposes only and does not constitute investment advice.