The Great Reset: Private companies trading close to their second-to-last primary round
In this short clip from our Q3 Forge Investment Outlook webinar, Andrew Alden, Senior Director of Quantitative Analytics, shares insights on how private company valuations have changed over the last four years.
Learn more about “The Great Reset” and find additional private market data in the Forge Investment Outlook report.
So, let's talk a little bit more about where these valuations to today. It seems like many private companies are still trading at relatively deep discounts as you just explained
They're trading at around a 52% median discount to their last primary fundraising round. Forge global CEO, Kelly Rodriques has been commenting recently that these discounts represent something of a “Great Reset” of private company valuations. Now, as a result of the secondary market transactions that take place on the Forge platform, Forge has a unique vantage point on pricing relative to current valuations and maybe even relative to previous round valuations.
So, can you tell us more about what the data is saying here?
Yes, I'd be happy to. One chart we put together recently to help us understand where we are right now is the following
in which we plot the median trade premium/discounts relative to the last funding round as well as to the second to last funding round. In hindsight, we all know that the last round for many companies done in 2020 or 2021 was done in another era of cheaper money and higher valuations. Therefore, maybe it's helpful to see how prices compared to a period prior to that.
Very interestingly, from about 2022 onwards, we're seeing trade premium/discounts to the second to last round to be close to flat to those rounds. And currently at -5%. This tells us that from a premium/discount standpoint, the current market has mostly wiped out the prices received in the last primary round. It also hints perhaps the prices are normalizing. Premium/discounts to the second to last round have been more stable for 9 months or so. And perhaps this is a helpful reference point to consider - measuring prices relative to a funding round done in a less frothy time than the last round.
Please Read These Important Legal Notices & Disclosures
The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc., Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.
To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.
This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.
Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions. Forge Data LLC is an affiliate of Forge Global, Inc. and Forge Securities LLC.
Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Past performance Is not indicative of future results.
Please Read These Important Legal Notices & Disclosures
The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc., Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.
To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.
This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.
Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions. Forge Data LLC is an affiliate of Forge Global, Inc. and Forge Securities LLC.
Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Past performance Is not indicative of future results.