The private markets are becoming increasingly less private
The private and public markets are beginning to blend, but this didn’t happen overnight. A trend started around ten years ago of private companies staying private longer –bringing us a current massive class of 650+ private unicorn companies valued at $1B+. Today, it can be difficult to find a company that was valued at below $10B before going public, while some companies are valued at $50B or more when they exit.
This has created an increasing desire from public market investors who are looking for the opportunity to invest in companies pre-unicorn status and participate early on in the innovation and value creation of private businesses. However, gaining access to and understanding the nuances of the private market is much more challenging compared to the public market.
Clearing muddy waters
The public market is generally efficient and incredibly transparent, with a high volume of trading occurring in short amounts of time. The private markets, on the other hand, are more opaque. Jane Atherton, managing director of investments at Temasek, explains that most investments done in the private markets are done in a bespoke and highly curated manner that isn’t easily scalable.
But we’re starting to see a nascent yet critical private security infrastructure being built to combat these challenges and meet evolving demands for easier access and frictionless participation on the private market.View quick clip below.
These demands are coming from the companies themselves, which are looking to provide more liquidity opportunities to employees, more seamlessly run capital-raising programs to appease shareholders, and better understand their valuation. It’s also coming from accredited investors who are seeking to invest earlier a private company’s lifecycle, retail investors who are showing greater interest in new investment opportunities (i.e. they now have access to IPO shares thanks to platforms like Robinhood), and from banks and other institutional organizations that are looking to the private markets for a new revenue source through new products.
We believe private market waters will someday be as clear as the public market, though creating this vibrant, transparent ecosystem will take time and resources. New technologies and digital innovations, paired with the increased demand from all angles and players, will certainly help speed up these efforts.
A marketplace like Forge that has liquidity sourcing and price discovery insights is an essential part of bringing this modern infrastructure to life – a piece of the puzzle that can continue to foster innovation and create seamless experiences for companies and investors alike on the private market.
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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.
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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.