PreIPOSwap.com – New York 6/8/2022 — Startups are going public much later, in fact there are more than 1,000 companies with a valuation of $1 Billion or more, according to research firm CB Insights[i]. Public markets have seen arguably one of the worst sell off’s in market history, depending on how you look at it. How have private markets held up? The issue with private markets is there are no reporting requirements, so data needs to be picked and pulled from available sources. Securities firm Zanbato has built a dealer platform called ZX, “The world’s leading platform for banks, brokers, and their wealth management groups to trade private stock for institutional and private wealth clients,” according to their website. They have compiled the below prices on private companies that are the most actively traded on their platform (we have anonymized the company names for purposes of confidentiality):
| Co. | Apr-22 | Apr vs. Mar | Mar-22 | Feb-22 | Jan-22 | Change |
| A | $895.51 | -2% | $912.45 | $945.99 | $2,050.00 | -55% |
| B | $11.16 | -1% | $11.30 | $17.31 | $21.14 | -47% |
| C | $11.54 | -5% | $12.19 | $22.00 | $22.00 | -45% |
| D | $11.72 | 1% | $11.57 | $13.25 | $19.76 | -41% |
| E | $5.83 | -1% | $5.91 | $10.10 | $9.98 | -41% |
| F | $29.45 | 4% | $28.29 | $28.10 | $47.00 | -40% |
| G | $9.75 | 0% | $9.75 | $13.17 | $13.17 | -26% |
| H | $20.00 | 0% | $20.00 | $26.50 | $27.00 | -26% |
| I | $21.58 | -9% | $23.80 | $0.00 | $31.58 | -25% |
| J | $30.07 | -1% | $30.46 | $37.80 | $37.80 | -19% |
| K | $17.80 | -6% | $18.95 | $22.54 | $23.22 | -18% |
| L | $481.56 | -4% | $499.44 | $603.96 | $607.91 | -18% |
| M | $56.59 | -6% | $60.46 | $71.37 | $73.47 | -18% |
| N | $47.95 | -10% | $53.14 | $60.08 | $64.01 | -17% |
| O | $56.81 | 2% | $55.76 | $64.00 | $65.84 | -15% |
| P | $22.31 | -2% | $22.76 | $23.90 | $26.31 | -13% |
| Q | $31.71 | -12% | $36.17 | $41.11 | $41.78 | -13% |
| R | $16.58 | 0% | $16.51 | $20.29 | $19.03 | -13% |
| S | $59.42 | -1% | $60.14 | $60.34 | $69.00 | -13% |
| T | $23.46 | -1% | $23.81 | $24.41 | $27.23 | -13% |
| U | $23.99 | -6% | $25.54 | $30.47 | $28.23 | -10% |
| V | $1,440.91 | 8% | $1,335.43 | $1,355.63 | $1,471.74 | -9% |
Source: Zanbato[1] this a subset of the companies based on the ones that have the most downward movement in price in Q1 of 2022.
As you can see, the results are like public markets. Everyone intuitively knows that valuations have been at nose bleed levels for a long time, and this has been exacerbated by a Fed that looks to QE whatever the problem is. More QE was a solution to economic data as well as COVID. But, even if it’s widely accepted that a retraction was necessary, it’s still painful to live through an environment where there is a daily dose of fear and panic in the markets.
Public markets (Specifically, stocks) clearly set the tone for the short term macro environment. In many names, while bid pricing may have fallen – sellers may not be willing to sell at the depressed pricing. So the market dynamics are materially different for private companies due to the lack of liquidity and transparency. If a transaction happens via SPV (Special Purpose Vehicle), there is no reporting mechanism to report that a transaction happened at that price.
Many firms that own private stock may be selling for liquidity reasons (to generate cash for their balance sheet). “Bids have dried up,” says Steve Utley, GP of DT Unicorn Fund[ii]. “Traditionally in this market it’s hard to find sellers. There’s a ton of buyers chasing a handful of sellers. Now the buyers are mostly gone.”
But others are sensing that is changing, as bids are coming in to good names, although at somewhat lower levels. And even with these market conditions, companies are still raising money. This week billions of funding poured into private companies, according to Crunchbase News[iii]:
Companies in the energy sector seem like the big winners this week. But startups in and around the enterprise software space also made a big splash with investors. Despite that, the chatter this week mostly focused on the large SpaceX raise because, well, it involves both space and Elon Musk.
Specialist firms such as LevelX, that deal in private markets, are also seeing the market dynamics changing. “It’s not that there aren’t bids, there are bids. There are less of them, and buyers are more fickle. It’s a buyers’ market for sure, “ Says Joseph Gelet, Director of Private Markets @ LevelX[iv]. “Private markets are mixed, some companies are still seeing strong demand. Many buyers are questioning valuations and so they are reconsidering pricing on their bids. Many sellers do not want to sell at lower prices, so transactions are not happening in those names where this phenomenon is occurring.”
And due to a deteriorating IPO market, companies are of course choosing to stay private longer.
[i] https://www.cbinsights.com/research-unicorn-companies
[ii] https://dtunicornfund.com
[iii] https://news.crunchbase.com/news/biggest-vc-startup-funding-deals-clearway-energy-spacex/
[iv] LevelX Capital www.levelx.com