The news that SpaceX has achieved yet another valuation milestone will have sent a familiar pang of frustration through the City of London. The private rocket company, valued at over $180 billion, represents the sort of explosive growth that British pension funds and retail investors can only dream of accessing. And that is precisely the problem. A growing chorus of institutional voices is now demanding that regulators level the playing field, allowing UK investors a fair shot at the private markets that are reshaping the global economy.
Let me be clear: this is not about charity. This is about market efficiency and capital allocation. When Elon Musk’s enterprise soars, the bulk of the upside accrues to Silicon Valley venture capitalists and a select group of wealthy Americans. Meanwhile, British savers are left holding gilts yielding a pittance or chasing the same overpriced blue-chip stocks. The inequity is stark: the London Stock Exchange’s premium segment is a shadow of what it once was, with fewer IPOs and a shrinking pool of high-growth companies.
The root cause is regulatory inertia. The FCA’s listing rules, particularly the restrictions on investment trusts and the treatment of special purpose acquisition companies (SPACs), have made it difficult for retail investors to participate in pre-IPO companies. While the US has seen a proliferation of SPACs and private secondary markets, Britain’s approach has been cautious, some might say stifling. The result is capital flight: British money flows into New York funds that then invest in SpaceX, bypassing our own markets entirely.
The demand for fair access is not just about envy. It is about fiduciary duty. Pension funds that cannot access the private market are effectively short-changing their beneficiaries. The MSCI World Index, heavily weighted towards public companies, has dramatically underperformed the Cambridge Associates Private Company Index over the past decade. If UK institutions cannot capture this growth, retiree incomes will suffer.
Critics will argue that private markets are risky and illiquid. That is true, but it is no reason for prohibition. Investors should be allowed to make informed choices, not sheltered from opportunities by a paternalistic regulatory regime. The FCA’s rules on promoting unlisted securities are a relic of a bygone era. They treat adult investors like children, while sophisticated wealth managers can already access these assets through offshore vehicles. The result is a two-tier system that favours the rich and connected.
The solution is not to lower standards but to create a modern framework. The UK should follow the lead of the US JOBS Act, which allowed equity crowdfunding and relaxed rules on private placements. A new category of exchange-traded private securities could be established, with appropriate disclosure requirements and liquidity provisions. The London Stock Exchange’s attempt to launch a private market has been underwhelming, but it shows that the will exists.
Some economists worry about credit risk and investor protection. They point to the collapse of FTX and the frothy valuations of some space startups. But risk is inherent in capitalism. Better to have regulated access than a black market of unregistered offshore funds. The UK’s position as a global financial centre depends on its ability to evolve. If we cannot offer investors a piece of the next SpaceX, they will take their money elsewhere.
The bottom line is straightforward: private markets are the future of value creation. Public listings are no longer the preferred exit for many companies, and the UK must adapt or be left behind. The demand for fair access is not a squeak from a minority of hedge fund managers. It is a rational response to a market failure. Regulators should act before the capital flight becomes a stampede.
