Citron Research announced it has established a short position in the Fundrise Growth Tech Fund (VCX), citing what it describes as a substantial divergence between the fund's trading price and the value of its underlying assets.
According to Citron, VCX is trading above $400 per share while the fund's assets are valued at $19 per share. The research firm argued that this disparity poses a valuation concern for investors holding positions in the fund.
In its public statement, Citron also revisited regulatory issues involving the fund's sponsor, Fundrise Advisors LLC. The Securities and Exchange Commission charged Fundrise Advisors in August 2023 for violations related to paid solicitation. The SEC's action, as cited by Citron, found that Fundrise paid more than 200 social media influencers and online publishers a total of $8 million without appropriate disclosure.
Citron drew attention to disclosures in VCX's prospectus, which lists "Other Expenses - Marketing: 0.42%" as a fee charged to investors. The research firm translated that percentage into an approximate dollar amount, stating it equates to roughly $3 million in annual marketing expenses.
Beyond the headline numbers, Citron questioned the registration of the domain GetVCX.com, suggesting the domain itself may function as a marketing pitch for the fund. The research firm asked regulators to examine whether Fundrise is currently compensating influencers or content publishers to promote VCX, whether the GetVCX.com domain constitutes a misleading solicitation, and how the disclosed marketing expense is being spent.
Citron placed VCX in context by comparing it to Destiny Tech100 (DXYZ), another closed-end vehicle that provides retail access to private technology companies. Citron noted that when DXYZ launched in March 2024 it traded above $75 per share while its net asset value was about $5 per share. The research firm said DXYZ later traded at roughly $27 with a NAV of nearly $20 per share.
Using DXYZ's current premium, which Citron estimated at approximately 35%, the firm calculated an implied VCX price of about $26 if VCX's premium were to compress to the same level. On that basis, Citron estimated a potential decline of over 93% from VCX's then-current trading levels.
The announcement also noted a shareholder lock-up affecting approximately 100,000 investors who are unable to sell their positions until September. Citron asked the SEC Division of Enforcement to investigate whether current promotional activities are appropriately disclosed and to evaluate the marketing expenditures tied to VCX.
The statements from Citron outline valuation and disclosure questions and request regulatory scrutiny, while citing prior SEC findings related to the fund sponsor.