SpaceX long-term investor Valor Equity Partners handed part of its stake directly to investors rather than cashing it out.

On Sept. 16 local time, tech media outlet TechCrunch reported that Valor chose to distribute 8.5 percent of its SpaceX holdings to limited partners (LPs).

The transaction shows how Valor, founded by Antonio Gracias, will return the huge gains it made from investing in SpaceX. Gracias is known as a longtime supporter of Elon Musk and is also a current member of SpaceX's board.

According to U.S. Securities and Exchange Commission filings cited by Bloomberg, Valor has invested in SpaceX over decades. As a result, entities controlled by Gracias held more than 500 million SpaceX shares at the time of the initial public offering. The report said that amount was second only to Musk, who held more than 6 billion shares.

The shares Valor transferred to investors are estimated to be worth about $8.5 billion. After the transfer, Valor will still hold more than 460 million SpaceX shares. SEC documents also specify that Valor will hold more than 460 million shares after the distribution.

Structurally, the key is that this was not a cash payout but a transfer of stock ownership. If SpaceX shares are transferred directly, Valor's LPs may benefit from a tax perspective. The original text noted that the ownership transfer could provide tax advantages to LPs.

From a market perspective, the bigger point is that it avoided a large sale. If Valor had dumped its holdings in the market at once, the number of tradable shares could have surged and weighed on the share price. The outlet also explained that it "avoids dumping a huge amount into the public market." It added that "if available shares overflow, the price can fall."

The choice also ties in with SpaceX's recent share-price performance. SpaceX is already down about 10 percent since the first day of the major IPO. With large additional selling potentially increasing volatility, Valor appears to have chosen a way to reduce market shock.

The move is closer to a compromise in which Valor realises investment results in SpaceX while not sharply cutting its stake. LPs receive SpaceX shares directly instead of cash, and Valor still keeps a large holding of more than 460 million shares. The transaction is therefore read as an example of how major SpaceX shareholders cash out and how stakes in large growth companies that are unlisted or newly listed are distributed.