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The AGM #11 Roundup: What we learned in April
Updates on DXYZ, Milken, SPVs, and QSBS.
Andrew Fielding
May 07, 2024
DISCLAIMER: Things I am not: an accountant, a lawyer, a fiduciary to any reader, or a registered advisor. I’m just a guy writing a newsletter so none of this constitutes any tax, accounting, legal, life, or investment advice.Following up from last week
Today we’ll have a roundup of what happened in April on The AGM. I’m at Milken this week and while I’ll try to get you an issue next week, don’t be surprised if there is no issue next week.
If you’re also at Milken and see me (and I’m not in a 1:1 meeting) please do feel free to stop me and say hello. while I am a bit of a giant (6’4, 270….ding) , I promise I don’t bite
I will also be speaking at the Bridge Funding Global annual conference on Thursday morning in San Francisco — if you’re there please do say hi! Apologies in advance if I’m a zombie, I’ve thoroughly overbooked myself this week.
I’ve been blown away by the positive response to last week’s issue on SPVs. Since last Tuesday The AGM subscriber base has grown over 20% — that’s a huge one week increase. I hope that future issues are able to resonate to a similar level.
Roundup:
April
To start let’s go over how this roundup will work. Every issue since the last roundup will be covered, in this case since it’s our second roundup that means issues seven through ten.
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Table of Contents
Issue #7 Numbers: QSBS Venture's Better Version of an Opportunity Zone
The key point: QSBS is one of the best tax advantage schemes of any category due to the lack of required re-investment. QSBS can eliminate the entire federal tax liability for many venture deals within the constraints, and deals should be considered net of tax. QSBS can also apply as early as company formation and depending on deal terms in to middle rounds including small Series Bs due to the gross asset (not dollars raised) test.
What to look for in the future: There will be an issue on other aspects of QSBS in the future including fund pass through mechanics.
Links: The AGM Issue #7
Issue #8 In the News: What everyone doesn't understand about DXYZ
The key point: Destiny Tech 100 (NYSE: DXYZ) is an overvalued closed-ended fund (read: NOT an ETF) which was at one point valued at over 20x it’s book value. The significant market interest from retail indicates an unmet need for private tech companies to go public. DXYZ itself is a flawed vehicle with poor investment selection that will likely see further NAV reduction outside of its SpaceX holdings.
Updates since publishing: Since Issue #8 was published DXYZ has dropped to $13.20 (as of May 2 close) which is now less than a 3x premium on NAV, which still seems quite high. Additionally it has come out that the founder (who subscribes to this newsletter) continues to sell shares in addition to the sales covered in the original issue.
At its current valuation DXYZ’s market cap represents less than 0.06% of the total closed-ended fund market. Caution must be taken when drawing conclusions from anything related to this marekt — something I should have highlighted further in the original piece.
Also since it was originally covered in The AGM, some trusted sources have come out covering DXYZ in less than favorable light. These include both Reuters and Morningstar which had a killer headline “This Closed-Ended fund is not Destiny’s Child". It’s fun to know you scooped a wire service and a Morningstar analyst.
Also in response to Issue #8 I learned of some other vehicles that are aiming to go public or are public. I am in touch with leadership at two of the firms and hope to cover them more in the future.
Links: The AGM Issue #8 | Morningstar: Not Destiny’s Child | Reuters: Meme Fund