Citron Shorts Fundrise (VCX), Citing 93% Downside Risk

Citron Research Targets Fundrise Growth Tech Fund

Citron Research has initiated a short position against the Fundrise Growth Tech Fund, symbol VCX, citing a severe disparity between its market price and underlying asset value. The influential short-seller reported the fund trades above $400 per share while its net asset value, or NAV, stands at just $19.

Valuation and Marketing Scrutiny

The firm's report highlights past regulatory issues with the fund's sponsor, Fundrise Advisors LLC. The sponsor was charged by the Securities and Exchange Commission in 2023 for failing to disclose payments to social media influencers. Citron has called for a new SEC investigation into current marketing expenses and promotional tactics, questioning whether influencers are again being paid without proper disclosure.

Market Impact and Precedent

Citron compares the situation to Destiny Tech100, another fund that saw its high premium to NAV compress significantly after its launch. Applying a similar valuation metric, Citron calculates a potential 93% downside for VCX, implying a target price of around $26. This analysis comes as 100,000 investors remain in a lock-up period, unable to sell shares until September.

Summary

The short report from Citron Research places significant pressure on VCX's valuation, questioning its market price and promotional strategies. The fund's trajectory will be a key point of focus for investors, especially leading up to the expiration of the investor lock-up period, which could introduce substantial selling pressure.

FAQ

Q: Why did Citron Research short Fundrise VCX?
A: Citron shorted VCX due to an extreme valuation gap, with its share price over 20 times its net asset value, and concerns over the sponsor's marketing practices.

Q: What is the potential downside for VCX stock?
A: Citron Research calculates a potential price decline of over 93 percent if the fund's premium compresses to levels seen in comparable closed-end funds.

Source: Investing.com