By Suzanne McGee
(Reuters) -A new fund that gives shareholders access to private technology companies has sent investors on a wild ride in recent weeks while drawing criticism from the likes of Morningstar and rival ARK Investment Management. Shares of Destiny Tech100 are up about 200% since launching on March 27, following a tumultuous three-week run that saw it rise as much as 1,172% from its debut price of $8.25. Shares of the fund closed 13.1% lower at $24.68 on Monday. The fund owns stakes in approximately 25 private technology and growth companies, including SpaceX, OpenAI, Instacart (NASDAQ:) and online payment processor Stripe. It plans to update its stock every quarter, and creator Sohail Prasad said last month that he would like to see 100 companies included eventually.
It currently has a market capitalization of $276.46 million. Last week, it filed with the SEC for a secondary stock sale of up to $1 billion in new shares. While not the first fund of its kind, Destiny Tech100 appears to have caught the attention of the meme stock crowd, helping to fuel furious swings in stocks of everything from GameStop (NYSE:) to more recent offerings like Trump Media & Technology. Group. Prasad founded DestinyTech 100 in late 2021, aiming to provide broader access to a diversified pool of pre-IPO companies typically reserved for high-net-worth investors. “These are companies that people know and love and often use in their daily lives, but they can’t invest in unless they are rich,” he said.
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Destiny submitted a secondary offer.
The proceeds are intended to fund the development of products that will further bridge the gap between public and private markets, said Ethan Silver, Destiny’s Chief Operating Officer. According to the SEC filing, Prasad’s Destiny XYZ still owns 1.08 million shares.
The fund’s shares hit a 52-week high of $105 on April 8.
Other funds have offered similar products, including ARK Investment Management, the firm led by Cathie Wood. The ARK Venture Fund debuted in September 2022 but was slow to attract investors, resulting in them paying higher ownership costs than originally estimated.
A year ago, ARK offered waivers and refunds on these fees, capped at 2.9%. That fund now has total assets of $53.7 million.
Destiny Tech100 levies an estimated fee of 4.98%, according to the SEC filing.
Speaking to Reuters after an event in London, Wood said the rival fund’s structure and fees mean investors face “a much higher price” in exchange for daily liquidity. In a note to investors last week, ARK argued that its approach to pre-IPO investing is better than that of Destiny Tech 100, saying it offers a share price closer to the shares’ intrinsic value and that shareholders can invest up to 5 % of the fund’s shares. total assets per quarter.
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“We believe liquidity is the most important thing,” Prasad told Reuters in an emailed response to the ARK criticism, adding “we have made it simple” by allowing investors to buy and sell shares of DXYZ through their existing broker platforms.
Prasad added that he appreciates that ARK’s comments helped educate investors about the concept.
“There are a lot of structural changes happening in the private markets and it’s great to see another forward-thinking company trying to drive innovation and progress.”
Morningstar also published its own critique of Destiny Tech100 last week, targeting some of the same issues raised by ARK.
“Investors would be wise to stay on the sidelines,” Jack Shannon, senior manager research analyst at Morningstar, said in a report in light of the fund’s structure. “Destiny Tech100’s massive bounty represents a unique opportunity for investors to enrich others at their own expense.”
Prasad declined to comment on Morningstar’s assessment.
