Investing pitfalls: SpaceX, OpenAI, and why you shouldn’t care (too much)

When you see headlines about SpaceX, OpenAI, or Anthropic, it’s tempting to feel like you’re missing out. These are the companies shaping our future, right? Space travel and artificial intelligence must be the next big thing. Surely you should be scrambling to get a piece of that action.

Not so fast.

Let’s talk about what an IPO actually is, why these listings get so much hype, investing pitfalls, and more importantly, why it probably doesn’t matter for your long-term wealth. Then we’ll touch on a couple of Kiwi-specific updates that actually do affect your back pocket: the proposed FIF threshold increase and the KiwiSaver government contribution cut-off.

What’s an IPO, anyway?

An Initial Public Offering is when a private company decides to list on a public stock exchange. Up until that point, only founders, early employees, and venture capitalists could buy in. The IPO is the moment everyday investors like you and me, can finally buy shares.

Why do companies do it? There are two main reasons:

- To raise a heap of cash for future growth.

- To give founders and early backers a chance to cash out some of their hard-earned stake.

It’s not necessarily a sign that a sell-off is looming. Think of it more as a milestone, a way for the company to access more capital and reward the people who took the early risks.

Why all the buzz around SpaceX, OpenAI, and Anthropic?

Simple. They’re at the bleeding edge of space technology and artificial intelligence. These are the stories that sell newspapers and generate clicks. And when an IPO is on the cards, companies put a lot of effort into driving interest and the financial media goes into overdrive.

But here’s the thing: most of us won’t get shares at the IPO price anyway. By the time you can buy them on the exchange, the initial pop has often already happened. You’re not getting in on the ground floor; you’re buying at a premium which is often based on hype rather than fundamentals.

The boring (but profitable) truth

History shows that chasing IPOs isn't a winning long-term strategy. Trying to pick the next big winner is a gamble, plain and simple. And most of us will not have the knowledge or ability to find the information needed to make such predictions and avoid the common investing pitfalls.

If you're invested in managed funds, you’re already covered. Companies don’t get added to indices the moment they list, they have to meet eligibility requirements first. But over time, as indices update, you’ll gain exposure to the successful new players without having to predict them early.

That’s the beauty of a long-term, low-maintenance approach. You don’t need to chase headlines. You don’t need to pick winners. You just need to stay the course and let the market do its thing.

Now, something that actually matters for Kiwis: the FIF threshold

While the IPO buzz might not affect your portfolio, there’s a proposed change that could. The FIF (Foreign Investment Fund) threshold.

Currently, if the total cost of your overseas investments exceeds $50,000, you’re subject to the FIF tax regime, which can be complex and costly. The Government has proposed lifting that threshold to $100,000.

First let’s define a foreign investment. A foreign investment fund (FIF) is an offshore investment that is:

• a foreign company

• a foreign unit trust

• a foreign superannuation scheme

• an insurer under a foreign life insurance policy.

  
  

Now for the current regime. How do you work it out? There are various exemptions from the FIF rules but if none of these apply to you, calculate FIF under one of these methods

• fair dividend rate (FDR) method

• comparative value (CV)

• cost method (CM)

• deemed rate of return (DRR)

• revenue account method (RAM)

• attributable FIF income method.  

  
  

Here’s what the proposed threshold increase means for you:

- The threshold is based on the original purchase price of your overseas investments, not their current market value. So if you bought shares years ago and they’ve grown, you’re still measured on what you paid.

- If your total cost stays under the threshold, you generally only pay tax on dividends, which is much simpler than the full FIF calculations.

- Keep in mind: dividend reinvestments increase your cost base over time, so that $100,000 limit can creep up on you.

- Investments held across multiple platforms all count towards the same threshold. No double-dipping.

- NZ PIE funds don’t count towards your personal FIF threshold because the tax is handled within the fund itself. That’s one reason they remain a tax-efficient way to access global markets.

If this change goes through, it could make direct overseas investing a lot more straightforward for many New Zealanders. But even if it doesn’t, diversified PIE funds are still a solid, tax-smart option.

Although we have covered a fair bit of tax-chat, we are not tax specialists and Naked Finance does not provide tax advice. If you are wanting to know more about these topics, we encourage you to contact your own accountant or tax specialist. You can also find out more information at www.ird.govt.nz/foreign-investment-funds.  

Don’t forget the KiwiSaver government contribution

On the topic of things that actually impact your finances, have you maxed out your government contribution this year? Even if you haven’t saved the full amount, you still get 25 cents for every dollar you contribute between 1 July and 30 June.

To get the full $260.72, you need to contribute at least $1,042.86 of your own money during that period. And remember employer contributions, past government top-ups, and money moved from Australian super schemes don’t count towards that $1,042.86, it’s only your own contributions that matter.

The bottom line and investing pitfalls

IPOs will come and go. Headlines will scream about the next big thing. But for most of us, the smartest move is to stick with a diversified, long-term plan. You’ll still benefit from tomorrow’s market leaders, just without the stress, the FOMO, or the risk of overpaying.

And while you’re at it, take a moment to consider the FIF threshold and your KiwiSaver contribution. These are the nuts-and-bolts decisions that actually move the needle for New Zealand investors.

If any of this has got you thinking about your own strategy, whether it’s IPOs, FIF, or just making sure you’re on track, get in touch. We’re always happy to have a no-obligation chat.