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on to the show. Welcome

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to Tech News Briefing. It's Monday,

1:01

April 28th. I'm Katie Dayton

1:04

for The Wall Street Journal. Today,

1:06

we're reflecting on a very

1:08

modern parental decision, the age

1:10

in which kids should get a smartphone. Spoiler,

1:14

there doesn't seem to be much of a consensus.

1:17

Then, we're zooming in on SpaceX. Elon

1:20

Musk keeps its inner workings as

1:22

a bit of a mystery, and that

1:24

opacity also applies to its investor

1:26

base. We take a look at who

1:28

exactly is getting a cut of the

1:30

$350 billion business and

1:32

how. But

1:37

first, what do you do when

1:39

your kid wants a smartphone but you're not

1:42

sure if they're ready? WSJ columnist

1:44

Sumathi Reddy recently found herself in

1:46

that position when her 11 -year -old daughter

1:48

asked to join the ranks of

1:50

nearly all of her friends with devices.

1:53

The question brought up a fair amount

1:55

of soul searching for Sumithi, who joins

1:57

us to explain. So,

1:59

Sumithi, I'd love it if you

2:01

could tell me a little bit more about

2:03

your daughter and why she's pressing to

2:05

get a phone right now. My daughter is

2:08

11. She's in sixth grade. And all

2:10

of her friends, I would say, except for

2:12

a couple, have phones. She's

2:14

really one of the last ones standing. So

2:16

it's been this sort of... like when am

2:18

I getting a phone? When am I getting

2:20

a phone? And she's a very sweet girl.

2:22

So she's not like demanding one, but it

2:24

comes up quite a bit. You write in

2:26

the story that you're clinging to her phone

2:29

free days like a baby holds a mother.

2:31

Why do you feel that way? I guess

2:33

the way I was thinking of it was

2:35

like getting your phone is when like kids

2:37

mature these days because they're exposed to all

2:39

this more mature material. And you know, I've

2:41

noticed that like her and she has a

2:43

couple of friends who don't have phones. are

2:46

in some ways more not like childlike,

2:48

but sometimes the things they do are

2:50

more like play hide and seek or

2:52

just don't involve looking at Snapchat and

2:54

YouTube. And do you think your

2:56

daughter understands your reasoning for why you're

2:58

a little bit hesitant to give her a

3:00

phone right now? No. I don't think

3:02

she quite understands the whole thing. And I

3:04

do mention in the story that I

3:06

have an older son, who in many ways

3:08

was very similar to her. He was

3:10

this great kid, really sweet, great

3:12

self -control. Not someone who ever got in trouble

3:14

or he wasn't addicted to video games or

3:16

any of that stuff, screens. Once

3:19

he got a phone, it did change him.

3:21

I mean, as it does all kids and

3:23

teenagers and adults. And even

3:25

though he had this great self -control, he's

3:27

as addicted to his phone as anyone

3:29

else or more. Since you gave your

3:31

son his phone a few years ago

3:33

how much do you feel the conversation

3:35

around kids and phones has changed especially

3:37

with other parents. Yeah i mean

3:39

there's been so much research and so many

3:41

studies about the detrimental effects particularly of like social

3:43

media and some of those sites which the

3:45

journals done a lot of stories on as well

3:47

the people are just more aware of that

3:49

and even in writing the story i got a

3:51

lot of. emails from parents

3:54

that kind of signaled that the tide

3:56

was turning a little bit, especially like

3:58

in California. It seemed like I was

4:00

getting lot of emails being like, oh, we don't

4:02

do that here. I have like a pact with

4:04

these other parents. None of our kids have phones.

4:06

We're all going to wait till high school. And

4:08

you think, though, that you're not going to wait

4:10

until high school at this point? You think it's

4:12

going to be sooner rather than later that your

4:14

daughter gets one? Yeah. I mean, once she starts

4:16

taking this subway, going further afield, I feel like

4:18

you kind of need a phone just to be

4:21

able to look up. subway delays and issues and

4:23

reach your parents and friends more easily. So

4:25

I feel like living in New York City, it's not

4:27

really practical for us. Maybe if we live somewhere else,

4:29

we could get away with waiting longer, but

4:31

it's going to be hard doing that here.

4:34

That was our columnist, Sumithi Reddy.

4:37

Coming up, inside the complicated

4:39

and secretive world of

4:41

SpaceX's InvestiBase. That's after

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the break. This

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more at Viking.com selling

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access to stakes in his

5:22

private companies, including SpaceX. The

5:25

setups operate through a complex web

5:27

of funds, allowing the company to remain

5:29

private. Corey Dreebush was one

5:31

of the reporters navigating the web to

5:33

get the story. So, Corey,

5:35

can you start by taking us

5:37

through just how SpaceX has remained

5:40

a private company, despite it being

5:42

so old and sporting this incredibly

5:44

high valuation? Sure. So

5:46

it is pretty rare for

5:48

a company to remain private

5:50

as long as SpaceX has,

5:52

particularly one that is backed

5:54

by venture capital firms. SpaceX's

5:57

size and its stature, for

5:59

most companies, would have forced

6:01

it to go public, but

6:03

not SpaceX. There's quite

6:05

a few reasons why. For

6:08

one, SpaceX, by nature

6:10

of the business, has government contracts and

6:12

maybe some of the business that

6:14

it does wants to remain private. It

6:16

doesn't want to reveal all of

6:18

these contracts and its financials, which as

6:21

a public company must do. Another

6:23

way SpaceX has been able

6:25

to stay private is by

6:27

limiting its investor base. The

6:29

SEC requires that once you

6:31

reach a certain number of

6:33

quote -unquote holders of record

6:35

in a company, The

6:37

company is legally required

6:40

to disclose financial information regularly,

6:42

similar to that of a public

6:44

company. That number has grown. This

6:47

famously is one of the reasons

6:49

Facebook was forced to go public

6:51

back in 2012. That was

6:53

when the threshold was 500

6:55

shareholders of record. Post Facebook's

6:57

IPO that was increased, and now

6:59

it's 2000, and SpaceX

7:01

is skirting that. And one of

7:03

the ways it does that is

7:06

it keeps a tight control

7:08

over its investment base by doling

7:11

out the shares to existing

7:13

investors and then those investors in

7:15

turn sell. Interests

7:17

in the shares and their

7:19

funds through a spider web

7:21

of funds, if you will,

7:23

that are often structured as

7:25

special purpose vehicles or SPVs.

7:28

And so in that case,

7:30

investors buy shares of holding

7:32

companies that own the shares

7:34

of SpaceX in this example. From

7:36

what you gleaned from your reporting, why

7:39

has Elon Musk kept it this

7:41

way for so long? Many CEOs,

7:44

even public CEOs, would say they

7:46

wish their company were still

7:48

private. Think of a public company,

7:50

every three months you need

7:52

to report financial results. Also, as

7:55

a public company, you have

7:57

a stock that trades every single

7:59

day the public markets. your

8:02

stock price really is at

8:04

the whim of whomever is trading

8:06

that day and whatever news

8:08

or whatever feelings that people have.

8:11

It's nice to say that

8:13

stocks trade in line with the

8:15

fundamentals of a company, but

8:17

we know that that's not actually

8:19

the case all the time.

8:21

I mean, look at Tesla right

8:23

now. Look at Tesla stock

8:25

price that has jumped wildly up

8:28

and then fallen wildly down

8:30

this year around the musks kind

8:32

of polarizing role in the

8:34

White House doge or the Department

8:36

of Government efficiencies and overseas

8:38

competitive pressures. Your piece runs

8:40

us through a host of characters that

8:42

are sort of the conductors of who

8:44

gets a slice of SpaceX. One

8:47

of which is the investor Antonio

8:49

Gracius. Can you tell me a

8:51

little bit more about him and

8:53

how he ended up in musks

8:55

in a circle? Yeah, so Antonio

8:57

Grasius and his Valor Equity partners

9:00

was one of the early investors

9:02

in SpaceX. So

9:04

they've been invested for a

9:06

very long time and Grasius

9:08

and Musk have become friends.

9:10

What we learned through core

9:12

documents is that their families

9:14

spend Christmases together and they

9:17

vacation together in the Bahamas

9:19

and Jackson Hole, Wyoming at

9:21

one point in court

9:23

testimony a few years back.

9:25

Gracia said that he also

9:27

invested directly in Musk himself

9:29

and he extended a one

9:31

million dollar personal loan to

9:33

Musk. And Gracia said that

9:35

he couldn't recall if he had

9:37

charged interest to him. So

9:40

that kind of speaks to

9:42

their level of friendship. Another

9:44

one of the people you mentioned

9:46

in the story is Luke knows

9:48

that. Can you tell us a

9:50

little bit more about who he

9:52

is and what he does? Nosek

9:54

is a SpaceX board member who

9:56

also worked with Musk a PayPal

9:58

before he joined Founder's Fund in

10:01

2006, and he and Musk remain

10:03

close. For instance, we learned from

10:05

our reporting that they've attended game

10:07

nights in Austin, Texas, where they

10:09

play the game Werewolf together. Nosek,

10:12

his fund is GigaFund,

10:14

and how GigaFund has

10:17

worked in this story

10:19

is that gig of

10:21

fund purchases, secondary

10:23

sales of SpaceX, and

10:26

then they form their

10:28

own funds and they

10:30

sell interest in those

10:32

shares. How did the

10:34

people named in this story, including Musk,

10:36

respond to your reporting? As

10:39

we mentioned in our story, everyone

10:41

we reached out to, all the investors

10:43

we reached out to, either declined

10:45

to comment or did not respond to

10:47

request for comment. What was

10:49

your big takeaway from this reporting? When

10:51

you think about this story,

10:53

it's important to think about SpaceX

10:55

in particular as a company.

10:58

This is one of the largest

11:00

companies in the US, and

11:02

it's also extremely secretive. Its

11:04

finances are hidden from all but

11:06

a small group of investors

11:08

and insiders. So most people with

11:10

stakes in SpaceX, including those

11:12

who buy into SPVs, they have

11:14

no clue how much money

11:16

the company makes or loses. And

11:19

yet the valuation of this

11:21

company has grown astronomically over

11:23

the years. And it

11:26

stands to gain even

11:28

more with Musk being so

11:30

close to Trump administration

11:32

officials, not just Trump himself.

11:35

That was WSJ reporter Corey

11:37

Dreebush. And that's it for

11:39

Tech News Briefing. Today's show was

11:41

produced by Julie Chang with

11:43

supervising producer Melanie Roy. I'm

11:46

Katie Dayton for The Wall Street Journal.

11:48

We'll be back this afternoon with TMB

11:50

Tech Minute. Thanks for listening. machines

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