Retail investors are now rapidly dumping their shares in Fundrise Growth Tech Fund (VCX) after activist short-seller Citron Research disclosed a short position in the stock and raised questions about the credibility of its sponsor.
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VCX Plunges after Citron Attack
The closed-end fund, which had surged by up to 1,360% in pre-market trading on Thursday from its opening price about a week ago, later cratered about 42% to roughly $221 per share during the morning session.
VCX holds a 20.7% stake in Anthropic, 17.7% in Databricks, and 9.9% in OpenAI, according to its website, offering retail investors pre-IPO (initial public offering) exposure to the most sought-after private companies on Wall Street that are expected to make their public debut this year.
However, Citron, in an X post published with an image titled “VCX Explodes! Fundrise,” criticized the fund’s massive premium to its net asset value (NAV) of $18.95 per share. Earlier in the day, VCX’s shares climbed as high as $457.99, giving it a hefty premium of 2,314% to its NAV at the time.
“Citron is short VCX (VCX). VCX is trading at $400. Its assets are worth $19. SIMPLE MATH,” the research firm wrote on X.
Citron Calls for SEC to Investigate VCX
The activist short-selling outfit also pointed to a 2023 case in which Fundrise Advisors, LLC, the managers behind the VCX, was charged by the U.S. Securities and Exchange Commission (SEC) with willful violation of U.S. investment promotion rules.
According to the SEC, Fundrise Advisors “willfully” paid more than $8 million to 200 social media influencers and online newsletter publishers to promote its products without providing legally required disclosures to investors. The payments occurred over a five-year-plus period starting in February 2016.
The company settled the case with the SEC after paying $250,000 in civil penalties. However, Citron called on the securities watchdog to investigate whether the same underhand practice is at play with VCX.
In addition, the short-seller questioned Fundrise Advisors’ previous use of a call-to-action-style domain name, GetVCX.co. Citron also queried who was getting the 0.42% “other expenses — marketing” — which it estimates at roughly $3 million a year — that VCX disclosed in its prospectus.
Is VCX a Buy?
TipRanks’ technical indicators continue to signal VCX as a Buy despite the risks. This is based on six Bearish, one Neutral, and nine Bullish signals logged over the past week.
