My company had plans to go public. That was then. What now?
- After a record-breaking year of IPOs, things are slowing down in 2022
- With Forge, employees have the opportunity to sell private company stock without waiting for an exit event
- Private markets are proving to be relatively stable, even in the face of global uncertainty and a public market slowdown
After a Record Breaking Year, the IPO Window has Closed
2021 was a record-breaking year for IPOs. With stock market performance exceeding expectations, companies were going public in remarkable numbers. 1035 companies held IPOs on the U.S. stock market in 2021, soaring past the previous record of 480 in 2020 1. IPOs raised $142.4 billion in 2021, an 82% increase from the $78.2 billion raised in 2020 2.
2022, on the other hand, is shaping up to be a tighter year for IPOs per data through the end of May. Lingering pandemic anxiety, supply chain slowdowns, geopolitical conflict, and inflation are all contributing to a tech stock sell-off, with the tech-heavy Nasdaq Composite Index down 24.5% this year as of June 1. Private companies are taking note, with many deciding to pause or postpone their public offerings. There were just 80 U.S. IPOs in Q1 of 2022; in Q1 of the previous year there were 401 3.
If you’re an employee with stock options in a private company that had plans to go public, this may not be welcome news. But don’t worry — it’s still possible to sell your pre- IPO shares. Keep reading to find out how Forge can help you navigate the process of selling your private company stock on the private market.
Build a Private Market Strategy with Forge
Private, or secondary, markets are playing an increasingly prominent role in the global financial system. One recent study estimates that private markets will include approximately $13 trillion in assets under management by 2025, as asset managers and owners continue to allocate more funds every year 4. This trend presents an exciting new opportunity for employees, as it’s never been easier to liquidate private company stock options without waiting for an exit event.
This is great news, but trading in the private market is more complicated than selling stock on a public exchange. Federal regulations, company policies, as well as the process of valuing private shares and finding buyers present unique challenges for anyone who wishes to sell on the secondary market. That’s where Forge comes in: our private market experts are here to help guide you through every step of the selling process.
When you register with Forge, you’ll be assigned a Private Securities Specialist who will leverage Forge’s proprietary data platform to help you value your shares and connect you with interested buyers from our network of more than 125,000 accredited investors and institutions. You’ll also have access to data-driven market insights, company data, and more. You can learn more about the benefits of a Forge membership here.
As a seller, what can I expect from the current market?
More employees than ever are looking to the private market as a way to unlock the funds in their stock option plans. In March and April of 2022, Forge saw the highest ever number of unique sell-side Indications of Interest on the platform. Forge has also recorded an increase in buyers to match the growing number of sellers, with data suggesting that the two sides are well-balanced.
But what about those factors that are putting the brakes on the public market? Do they affect the private market as well? To some extent, yes. But while private stock prices aren’t exempt from the broader market drawdown, they appear to be less sensitive to external factors. Although Forge saw an 8.9% decrease in prices of private company stocks traded on the platform from Q4 2021 to Q1 20225 , this number is substantially lower than the 31% price decline recorded by the Renaissance IPO ETF, an index of U.S. IPO performance.
So while sellers are increasingly offering their shares at a discount, the size of those discounts appears to be holding steady, remaining smaller than those we’re seeing in the public market. For more on the current status of the private market, take a look at Forge’s latest Private Market Update.
Create a free account with Forge today, and begin the process of selling your employee shares. Experience the full financial rewards of your hard work, without waiting for a public offering.
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.
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.