Effects of the pandemic: a look at the private markets throughout 2020
COVID disrupted global markets at the beginning of the year, however, significant trends have emerged in private market trading. Since the pandemic began, investor interest can be organized in two phases: first, the “stay-at-home” category blitz, which began in earnest in April/May, followed by a shift in interest to unicorns of all stripes charging toward public exits.
After a sharp decline in investor interest (i.e. buy-side indications) in late February and throughout March across the board, activity in the private markets accelerated starting in April, which only continued into the early summer months as investors flooded in with bids in companies best positioned to serve the needs of the stay-at-home sector: gaming, media and food delivery, plus big data and foodtech.
Come July, we saw indications that a herd of unicorns would attempt public offerings before the November presidential election to get ahead of any market-related impacts of an uncertain outcome. Investors and equity holders responded, shifting interest from stay-at-home categories seen earlier in the year to upcoming liquidity opportunities. In August, companies including Palantir and Asana filed S1’s, and pushed buy-side indications 26% higher than in June. One day after Asana filed its S1 and the day of Palantir's filing, August 25th accounted for 10% of the month's activity on the Forge platform, registering as the most active day of the entire year in terms of buy-side indications, with interest funneling into upcoming IPO candidates.
In September, there was a similarly strong trajectory of activity on the private markets for the third month in a row following the momentum in July and August, as many companies went public, including Snowflake, Palantir, and Asana. And, investor activity for the month – measured by the number of indications of interest placed – still toppled August highs, surging 25%, and with the numbers of issuers growing by 22%.
As we head into 2021, activity on the private markets continues to rise. After the November election, AirBnB, Wish and DoorDash made their debuts, and, with the number of global unicorns topping 500 and a spate of unicorns topping 500, more are lining up for 2021 offerings.
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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.