Pre-IPO through private banks, explained
How late-stage shares in companies like SpaceX, Anthropic and OpenAI reach individual investors, and what that does and does not mean.
Most people assume that shares in a large private company are closed to anyone who is not a venture fund or an employee. That is mostly true, which is why the question comes up so often: how does an individual investor come to hold shares in SpaceX, Anthropic or OpenAI before any of them has listed? The answer is private banks.
How the shares move
As a private company grows, its early employees and early investors accumulate shares they cannot easily sell. From time to time the company organizes a tender offer, in which existing holders may sell a portion of their shares to approved buyers. Separately, large blocks change hands in negotiated secondary transactions. Private banks take part in both. They gather demand from qualified clients, buy the shares on their behalf and distribute the allocation across those clients, usually through a vehicle the bank controls.
That is how our positions came to exist. We bought from existing holders through bank allocations. We did not invest in a primary round, we did not negotiate with the company, and the company did not choose us. We hold the shares as one investor among many, with no role in the company itself.
What the holder gets, and does not
A holder in this position gets economic exposure to the shares and very little else. There are no information rights to speak of: the company reports to its board and its major investors, and a bank vehicle, along with the individuals inside it, sits well outside that circle. There is no governance and no seat at any table. Liquidity is limited. The shares cannot be sold on an exchange, the vehicle may restrict transfers for years, and a listing, if one ever comes, usually brings a lock-up before anything can be sold. Shares of a private company can lose value, and there is no assurance a buyer will exist when a holder wants one.
We say all of this because the phrase pre-IPO sounds more exclusive and more certain than the reality. It is a long, illiquid position in a company we do not influence.
Why we still do it
We take these positions because we hold a view about what a small number of great companies become over a long horizon, and because we are willing to be patient and uninvolved while they get there. The late-stage positions and the early-stage checks are two expressions of the same instinct. One is a bet that a company at the beginning will become relentless. The other is a bet that a relentless company will keep going. We are comfortable holding both, and we expect to be wrong about some of each.
