SpaceX Investor Discovers Firm Sold His Shares Without Notice — A Cautionary Tale for Pre-IPO SPV Investors

Few retail investors would pass on the opportunity to buy pre-IPO shares in SpaceX. But for some early speculators, what seemed like a once-in-a-lifetime chance has become a costly ordeal.

A recent investigation by The Wall Street Journal profiled the New Jersey-based investment firm Late Stage Capital, which claimed to offer retail investors access to pre-IPO companies such as SpaceX. According to the report, the firm's practices have left dozens of investors unable to recover shares they believed they owned.

Ram Rupireddy, a data engineer, first heard about Late Stage Capital in 2020. He wired $17,250 to purchase shares in the satellite and aerospace company. At the time, SpaceX was valued at approximately $58 billion. By 2026, SpaceX's valuation had climbed to $1.77 trillion on its IPO day, and Rupireddy believed his 2,500 shares were worth roughly $300,000.

However, Rupireddy's expected windfall never materialized. When he found himself unable to access Late Stage Capital's online portal, he made repeated phone calls and sent multiple emails. The firm eventually informed him that it had sold his stock in 2024 for a total of $45,450 — a fraction of what he believed the shares were worth.

Rupireddy says he never received any notification about the sale. Compounding the confusion, he possesses tax documents from Late Stage Capital for both 2024 and 2025 indicating that he still owned SpaceX shares. Despite this evidence, the firm has not compensated Rupireddy for the discrepancy.

Rupireddy is not the only affected investor. According to The Wall Street Journal, approximately 100 other Late Stage Capital clients have reported the same issue, and many have filed complaints with the U.S. Securities and Exchange Commission (SEC).

Moneywise, which originally reported this story, emailed Late Stage Capital for comment but received only a mailer-daemon reply indicating the email address could not be found. The SEC had not responded by the time of publication.

How Special Purpose Vehicles Complicate Pre-IPO Investing

A key issue underlying firms like Late Stage Capital is that many did not hold direct stakes in the pre-IPO companies they promoted. These entities often operate as "special purpose vehicles" (SPVs) — investment structures that can participate in private markets without filing public records or meeting standard SEC disclosure requirements. SPVs typically rely on Regulation D exemptions, which permit private capital raising without full SEC registration but also without the periodic reporting and transparency obligations that public companies must satisfy.

While some SPVs do hold actual pre-IPO shares, many own only a fractional interest in another SPV that itself holds the shares. According to The Wall Street Journal's investigation, this layered structure appears to describe Late Stage Capital's arrangement. Investigators found that a Bahamas-based firm called Capital Truth held a portion of an SPV that owned SpaceX shares. When Capital Truth sold what it described as a "SpaceX stake" to Late Stage Capital, the transaction was one degree removed from the actual shares.

Even in cases where an SPV genuinely holds SpaceX equity, retail investors are not legally purchasing the underlying shares — they are buying a stake in the SPV itself. It remains at the SPV's discretion whether to distribute shares or cash to investors following an IPO.

Jared Fine, a partner at the global law firm Davis Polk, emphasized the degree of trust these arrangements require. "At the end of the day, like anything in life, it comes down to, do you trust your counterparty or with whom you're doing business," Fine told The Wall Street Journal.

Companies Warn Against SPV Offerings

On paper, pre-IPO investing in a company like SpaceX appears attractive. Data compiled by University of Florida professor Jay R. Ritter shows that IPO shares have historically gained an average of about 18.8% on their first day of trading. That figure does not account for the growth investors may capture while companies remain private.

However, SPVs come with significant trade-offs. Investors typically forfeit substantial control and transparency. Even in favorable scenarios, these vehicles often carry high fees that reduce potential returns.

Several prominent private companies have issued public warnings about SPVs. Anthropic, the AI research lab, stated on its official support page that "offers to invest in Anthropic's past or future financing rounds through an SPV are prohibited."

OpenAI stopped short of an outright prohibition but issued a cautionary statement on its website, stressing that investors need "to be careful if you are contacted by a firm that purports to have access to OpenAI, including through the sale of an SPV interest with exposure to OpenAI equity."

For investors weighing whether to participate in an SPV, the experiences of Late Stage Capital's clients underscore the importance of thorough due diligence — reviewing offering memoranda in detail, verifying a manager's registration status through the SEC's Investment Adviser Public Disclosure database, and confirming exactly what the SPV holds before committing capital.

This article originally appeared on Moneywise.