Every once in a while, some investments will get hot and the price the will soar. The problem of course is at some point the prices will fall and then to get to even will take a long time or you have to wait till the asset class becomes hot again. While something is hot, Wall Street is extremely creative and innovative in how you can invest in that asset class.

In an article by Echo Wang and David Jeans of Reuters, one of the expected hot IPOs or Initial Public Offering is SpaceX. The company is owned by Elon Musk and many people and institutions have made money with Mr. Musk so they are eager to invest in SpaceX.

The potential payoff from owning SpaceX before it goes public is big enough that any are willing to pay a premium for access and live with the uncertainty. It is likely to be a high IPO.

There is an opaque market for private company shares. These deals often rely on special-purpose vehicles or SPVs which do not own shares in the company. They pool investor money to buy the rights to purchase the shares at a later time.

Mitchell Littman, a New York-based lawyer who advises SPV managers and secondary market investors, said you are relying on the counterparties in these transactions and their reputations. Every type there is hype around these type of things, invariably the fraudsters come out of the woodwork because they smell an opportunity. There is intense demand of Space X.

The IPO has changed the landscape, because companies are staying private longer to build brand recognition and creating demand from investors. The change has pushed investors eager not to miss out into secondary markets, but in the secondary market can pass through as many as 5 intermediaries, each with its own layer of fees, obscuring who ultimately owns what.

Increased layering adds costs, which effectively compresses the potential profit margins and upside for investors in the IPO.

(in the calmer world of ETFs, the lower the fee, the more you keep).

Linking to dividend paying stocks, once you have assets, and as long as most of your assets in rather boring areas which continually make profits and pay dividends. You will be expose to hot areas in the market, making money quickly and trying to be richer overnight. Some of them will be fraud, some you will regret because they become long term investments hoping they get hot again. Protect yourself from the downside or your assets will quickly go down in value.

There are more questions than answers, till the next time – to raising questions.