A newly-listed closed-end fund has soared more than 1,500% above its net asset value since its debut last week, as investors eager for stakes in IPO-bound companies such as SpaceX and Anthropic PBC push the vehicle’s market capitalization far beyond the estimated worth of its holdings.
Shares in the Fundrise Innovation Fund, listed under the symbol Fundrise Innovation Fund LLC, climbed 64% to $314.99 each on Tuesday — just their fourth day of trading — and were halted twice for volatility, in an echo of the meme stock era. With the majority of the fund’s shares subject to a lockup agreement, investors bid the small amount that’s available more than 16 times above its recent net asset value per share of $18.97.
The fund, which also owns shares in OpenAI Inc., Anduril Industries Inc., Databricks Inc. and Ramp Inc., proposed becoming a publicly listed closed-end fund nearly five years after starting operations, in order to create potential value and increase liquidity, according to its filings with the US Securities and Exchange Commission.
For the fund’s roughly 100,000 investors who bought prior to the market debut, VCX shares acquired before Feb. 20 are restricted from being sold for six months after the listing, the filings show. Fundrise Innovation has about $679 million in assets under management, and more than 10% of the fund is not locked up, according to a spokesperson.
The question now for prospective buyers is whether its massive trading gains reflect a shared belief that the hot startups VCX holds will command even higher valuations once they go public, or a craze that will prove short-lived when the lockup expires, if not sooner.
“With the implied valuations when you have this premium, your upside is gone,” said Jack Shannon, equity strategies principal at Morningstar Inc. “Clearly, it’s going to attract some meme crowd and get some high octane trading. But if someone is in this for the long term, frankly, it’s a horrible investment at the current price.”
Public Venture Companies
Ben Miller is chief executive officer of Fundrise, VCX’s backer and an alternative investment platform with $3.5 billion of assets under management. He sees funds like VCX, or what he calls public venture companies, becoming a growing part of the market, especially given the preference of many companies to stay private for longer.
“I assume that companies will stay private and generally you won’t see companies going public until they are enormous, and I don’t think that’s going to change,” Miller said.
That’s true of the largest private company in the world, which is moving ahead with an IPO. SpaceX could raise as much as $50 billion in what would be the biggest ever listing, Bloomberg News has reported. That would potentially lay the foundation for IPOs of artificial intelligence companies including Anthropic and OpenAI, deals that are expected to richly reward those who secured private shares ahead of time.
VCX isn’t the only publicly traded closed-end fund with stakes in coveted pre-IPO companies, though its peers aren’t seeing comparable enthusiasm. Earlier this month, Robinhood Markets Inc. raised $658.4 million for a closed-end fund that has Databricks and Ramp shares, below its $1 billion target. It has mostly traded below its debut price of $25.
Destiny Tech100 Inc., a venture-focused closed-end fund whose largest holding is in SpaceX — accounting for 16% of its portfolio — sparked a frenzy when it debuted in 2024. Shares closed at $26.52 on Tuesday, down nearly three quarters from their peak.
Fundrise has no plans to take advantage of its vaulting share price to raise more capital for VCX in the near term, Miller said.
“We are trailblazing here, so one thing at a time,” he said. “From here if we do raise money it will be because we have some investments we want to make.”
The fund on Monday announced an investment in Erebor Bank, a tech-focused lender started by Anduril co-founder Palmer Luckey.
Investors who were able to acquire a relatively small percentage of shares in a pre-listing round offered via the Fundrise platform aren’t subject to the six-month lockup, though they were limited to buying only $10,000 worth, according to a filing. These shareholders are among the few backers who can take profit.
“It’s great for investors who want to get out. But if you are coming in, you are paying a huge, huge premium for the NAV,” said Matt Malone, the head of investment management at Opto Investments, a private markets wealth platform.
“This shows the dynamic from private markets to public markets, when public markets are often held out as the preferred pricing mechanism. But in this case, the public market price doesn’t really make sense.”
