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The call of destiny

Retail investors want private stocks

Why are investors vastly overpaying to own shares of Destiny?

4/10/24 2:56PM

The median valuation of a successful tech IPO increased from $548M in 2010, to $815M in 2015, to an astounding $4.3B in 2020 as an abundance of venture capital and private equity funding has allowed companies to stay private longer.

The biggest losers from this trend? Retail investors. Accredited investor laws limit most private investments to institutional and high net worth investors. The exceptions such as crowdfunded vehicles may allow retail investors to legally invest in a startup, but the reality is investment minimums price them out of most deals.

But what if you could buy shares in a public company that then invested in a private company for you? Enter: Destiny Tech100.

After purchasing shares of 23 private companies such as Stripe, SpaceX, and OpenAI, Destiny listed on the New York Stock Exchange with plans to increase its holdings to 100 different startups. “Tens of thousands of individual investors” have invested in the new vehicle since its listing, according to CEO Sohail Prasad, and its stock price has soared from $9 on March 26 to over $50 today.

There’s just one problem: the fund’s assets are worth just $4.84 per share according to Destiny’s SEC filing, which notes its private company holdings are worth $54,307,219. And yet, the stock is trading for more than 10x that, meaning that investors are paying more than a 1000% premium to invest in these startups. As Matt Levine noted yesterday, more than 90% of what investors are paying for is the premium for Destiny, not the underlying companies themselves.

Why would someone overpay 1,000% for this? I have three hypotheses:

Investors are fully aware of the premium that they’re paying, and they believe that the companies, or the potential of the companies Destiny picks, are worth it.
Investors saw that they can invest in Stripe and SpaceX for $56, they have no idea what net asset value is and they really don’t care — they just want to be able to own hot, buzzy startups.
Some investors realize that $56 is overpriced, but they also realize that enough investors don’t realize the stock is overpriced and are bidding the price up. These investors begrudgingly decide that, in the context of a limited supply for a misunderstood hot asset, this is the best price they’re going to get, and they’ll just have to pay a premium for it.

This is not much different than, say, someone paying $300 for a share of GameStop at a $20B market cap or $60 for Trump Media at 1,500x revenue because they “like the stock.” The market, in the short-term, couldn’t care less about your “valuations,” and your ability to invest at a fair price is dependent on the rest of the market understanding what a fair price is.

Nate Becker9h

DraftKings drops after issuing downbeat 2026 sales, profit forecasts

DraftKings plunged after the sports betting company gave downbeat guidance for the current year.

Shares were down 15% in recent after-hours trading.

It forecast:

Revenue between $6.5 billion and $6.9 billion, compared with analysts’ estimates of $7.29 billion, according to FactSet.
Adjusted EBITDA of $700 million to $900 million, compared with estimates of $981 million.

For the fourth quarter, DraftKings posted:

Revenue of $1.99 billion, in line with Wall Street’s $1.99 billion expectation
Earnings per share of $0.25, compared with a consensus estimate of $0.09.

DraftKings Reports Fourth Quarter Revenue Growth of 43% | DraftKings Inc.

It forecast:

Revenue between $6.5 billion and $6.9 billion, compared with analysts’ estimates of $7.29 billion, according to FactSet.
Adjusted EBITDA of $700 million to $900 million, compared with estimates of $981 million.

For the fourth quarter, DraftKings posted:

Revenue of $1.99 billion, in line with Wall Street’s $1.99 billion expectation
Earnings per share of $0.25, compared with a consensus estimate of $0.09.

Max Knoblauch10h

Rivian climbs after posting better-than-expected Q4 results; sees R2 SUV hitting the market in Q2

EV maker Rivian reported its fourth-quarter and full-year earnings results after markets closed on Thursday. Its shares climbed 13% in after-hours trading.

In the fourth quarter, which coincided with the end of federal EV tax credits in the US, Rivian booked $1.29 billion in revenue, down 26% year over year but above analysts’ expectations of $1.26 billion. The company posted an adjusted loss of $0.54 per share in Q4, compared to the expected loss of $0.68 per share.

Rivian forecast full-year adjusted losses in the range of $1.8 billion to $2.1 billion, compared to the $1.75 billion loss expected by Wall Street.

2026 is set to be a big year for the company, with its upcoming $45,000 R2 SUV planned to begin deliveries in the second quarter. Rivian issued full-year delivery guidance of between 62,000 and 67,000 vehicles, compared to Wall Street’s expectations of 65,700. Analysts polled by FactSet expect 14,700 of those 2026 deliveries to be R2s. Last year, Rivian delivered 42,247 vehicles.

“It’s incredibly exciting to see the early strong reviews of the R2 pre-production builds, and we can’t wait to get them to our customers next quarter,” CEO RJ Scaringe said.

Matt Phillips10h

Arista Networks soars as it beats on Q4 EPS and revenue, gives upbeat sales guidance

Arista Networks, which sells equipment and software used to run and monitor data center networks, reported better-than-expected fourth-quarter earnings and sales after the close of trading on Thursday.

Arista shares were up about 9% in the after-hours session.

Here’s what the switch and router maker reported:

Adjusted earnings per share of $0.82 vs. Wall Street expectations for $0.76, according to FactSet.
Sales of $2.49 billion vs. an expected $2.38 billion, per FactSet data.
A non-GAAP Q4 gross margin, a measure of how profitable a company’s core products are to produce, of 63.4% vs. previous guidance of 62% to 63%.
Guidance for Q1 sales of approximately $2.6 billion vs. the $2.46 billion expected on Wall Street.
Guidance for a Q1 non-GAAP gross margin of between 62% and 63% vs. the 63% FactSet forecast.

Matt Phillips10h

Coinbase posts record stablecoin revenue but falls short of expectations for Q4 sales

Shares of cryptocurrency exchange Coinbase jumped after-hours on Thursday after the company reported record stablecoin revenue, despite Q4 revenue numbers that missed Wall Street expectations.

The stock was up 3.1% in recent trading.

Revenue came in at $1.78 billion vs. the $1.81 billion consensus analyst expectation, per FactSet.
Transaction revenue was $982.7 million vs. a $998 million forecast.
The company reported adjusted earnings per share of $0.66, compared with $3.37 a year earlier.
Stablecoin revenue hit a record $364.1 million, up 61% from the same quarter the previous year.

Earlier Thursday, Coinbase seemingly suffered an outage, saying it was “aware that customers may be unable to buy, sell, transfer on Coinbase.com at this time,” but noting that “your funds are safe.” The company said the issue was resolved just over an hour later.

Coinbase shares — which were added to the S&P 500 last May — have been crushed by the downturn in crypto this year. Through Wednesday’s close, the stock was down by more than 30% in 2026. And that was before the stock caught a double downgrade on Thursday before the report.

Luke Kawa

10h

Applied Materials jumps after posting better-than-expected Q1 results, strong Q2 outlook

The semicap company just reported its Q1 results.

Applied Materials campus in Silicon Valley