Two decades in the markets has taught me that, at extremes in sentiment, nothing is ever as good or as bad as the markets might suggest.
For bargain-hunting value investors, public markets can be fertile ground. Why? Because they’re full of uninformed, emotionally-driven sellers. Retail panics. Index flows. Portfolio mandates. Forced liquidations. When sentiment turns, people sell first and analyze later. That’s how dislocations are born.
Private markets produce bargains too, but differently. Almost everyone is sophisicated. You won’t find a panicked retiree dumping shares. Bargains emerge when an owner of illiquid assets needs liquidity and is forced to sell into a thin market. If you’re one of the few buyers, you can be a price maker… you just don’t get to choose what is on sale.
When you want exposure to growth, the logic flips. You’re never going to steal a publicly traded growth company with great prospects at a distressed price. The best you can hope for is a fair one, and you’re far more likely to get a fair price in the private markets where the parties setting it are informed professionals on both sides, or when there is a motivated seller such as ex-employees with illiquid vested stock.
Public markets, with their emotional extremes, overshoot to the upside just as hard as they overshoot to the downside, especially when investors are starved for exposure they can’t otherwise access. These are two sides to the same coin. This makes gaining access to hyper-scaling growth platforms at a reasonable price hard to come by in the public markets.
Which brings us to VCX.
Fundrise packaged private stakes in Anthropic, Databricks, Anduril, SpaceX and others into a closed-end fund, then listed the vehicle publicly. I had a unique opportunity to buy a limited allocation pre-IPO through a pre-existing Fundrise account.
Within a week of its public debut, it was trading at over 30x the fund’s own stated Net Asset Value (NAV)!! 😮
Read that again… a listed investment vehicle holding private tech stakes was trading at over 3,000% of what the fund’s underlying holdings were worth!
Even today, after much of the dust has settled, everyday investors are willing to pay 4.5x today’s NAV to get exposure to generational growth opportunities, which they cannot otherwise access.
This access arbitrage illustrates the market dynamics that have been quietly developing… and that I have been pounding the table about. The best growth opportunities are staying private through the steepest part of their growth curve, while public investors get proxies and pay a premium for them.