Private Market Update - July 2024

Private Market appears poised to ride AI and inflation tailwinds in second half

Key Takeaways
  • Core private market metrics continue improving in June, with the bid/ask spread at a one-year low

  • AI theme continues to drive public market enthusiasm and private market fundraising

  • The IPO market remains quiet, but that could change as the macro outlook continues to improve

Overview

After two-plus years of turbulence, the first half of 2024 brought welcome respite to investors as public and private market assets delivered positive returns with relatively low volatility. The Forge Private Market Index ended June up 5.4% for the first six months of the year despite a small pullback in the month itself, while the S&P 500 rose 3.47% in June, closing the month up 14.48% for the first half of the year. 1 2

In the private market, these returns are supported by many of the underlying metrics that Forge tracks monthly. In June, the bid/ask spread for companies traded on Forge Markets fell to its lowest level in a year, and the top 25% of companies traded at a slight premium to their primary valuation for the first time in 2024.

Along with broad index returns and supporting data, M&A and investment activity continued signaling a more positive environment. Artificial intelligence (AI) companies continued raising venture rounds in June, highlighted by Elon Musk’s xAI completing a $6 billion Series B, and French standout Mistral AI closing €600 million3 financial market data acquisitions, as BlackRock acquired Preqin for $3.2 billion and AlphaSense acquired Tegus for $930 million. 4

IPOs continued to lag in this market, as June lacked both prominent new listings and filings for upcoming potential public debuts. Halfway through the year, there have been 95 IPOs in 2024 – an improvement from 2022 and 2023, but a far cry from the five years preceding it. 5 The long-term outlook for IPOs remains strong, with names like Stripe, Databricks, Fanatics, Chime, Klarna, and Liquid Death waiting in the wings – but investors remain uncertain as to when these companies will complete the process. 6

Looking ahead, the second half of 2024 has the potential to further crystallize the outlook for investors. The elephant in the room remains interest rate cuts. Inflation cooled considerably in May,7 and while Federal Reserve Chair Jay Powell has said that the Fed needs “more confidence” before cutting interest rates, the prospect is on the table for later in the year and may provide a boost to the IPO market. 8 The looming Presidential election also has the potential to influence monetary policy, technology policy, and many other aspects that drive the market.

Regardless of what comes next, private market participants can breathe a sigh of relief as the first half of the year concludes and look forward to their customary summer vacations with relative calm.

The Details

The Forge Private Market Index dropped -0.2% in June, but still closed the quarter positively with 0.8% return in Q2 2024 and a 5.4% return YTD. For the quarter, the Forge Private Market Index lagged the S&P 500 and Nasdaq 100, both of whom were driven by mega-cap companies and their AI stories, but outperformed the Renaissance IPO Index and the Russell 2000.

AI chipmaker Cerebras, which confidentially filed for an IPO in June9 led the Forge Private Market Index in the quarter and is also the third-leading performer for the year behind xAI and Gecko Robotics.

Fanatics, Epic Games, and Flexport – three later-stage companies – were the bottom price performers in the Forge Private Market Index in Q2.

May brought a notable shift in the distribution of premiums/discounts for companies trading on the secondary market to their last primary funding round, and this continued in June. Private companies on Forge Markets traded at a median discount of -32%, nearly in line with May, and the top 10% of companies improved to a 59% premium from 47% in May.

In addition, the top 25% of companies in June traded at a 1% premium to their primary round valuation – the first time this year that this number was above 0%.

Meanwhile, the bid/ask spread for companies trading on Forge Markets fell to 6.4% -- a notable drop from May, and a one-year low overall. This suggests that investors are expressing interest in private companies at relatively close prices, improving the chances of a matched transaction.

While the private market has a number of positive signals, there are still some metrics that suggest participants are exercising caution.

It should be noted that there was a significant drop in the number of companies with sell-side indications of interest (IOIs) in June, as sellers offered shares in 171 companies, which is the lowest level since November of 2022. While a lower number of sell-side IOIs may lead to less matched transactions in the short term, it may also be a sign of growing seller confidence in their equity holdings. In particular, given that many sellers are employees of private companies, this may suggest that those employees feel more assured about their company’s long-term prospects and are less motivated to sell.

While sellers may be showing more hesitation to sell, buyers remain hungry. In June, the buy-side represented 55.2% of all IOIs on Forge Markets, largely continuing the trend since the beginning of the year. Thus far in 2024, only two months have seen more sell-side than buy-side demand.

1 Forge Data 6/30/24

2 S&P Global 7/2/24

3 Pitchbook as of 7/2/24

4 Axios 6/11/24

5 Stock Analysis 7/2/24

6 Techopedia 7/9/24

7 Bloomberg 6/28/24

8 CNBC 7/2/24

9 The Information 6/20/24

About the Author

Dan Chaparian is VP of Product Marketing at Forge Global. Prior to joining Forge, Dan was VP, Global Product Marketing for BlackRock's iShares ETF business. He previously held positions at Apple and Uber and is a former startup founder. Read more from Dan.

*The term “institutional” is used broadly to refer to sophisticated, professional investors, and does not refer to an “institutional account” as defined under FINRA Rule 4512(c).

About Forge

Forge Global Holdings, Inc. (together with its subsidiaries, “Forge”) is a leading provider of marketplace infrastructure, data services and technology solutions for private market participants.

Legal Notices and Disclosures

© 2024 Forge Global, Inc. and its affiliates. All rights reserved. Investing in private company securities is not suitable for all investors, is highly speculative, is high risk, and you should be prepared to withstand a total loss of your investment. Private company securities are highly illiquid and there is no guarantee that a market will develop for such securities. Each investment carries its own risks, and you should conduct your own due diligence regarding the investment, including obtaining independent professional advice. Past performance is not indicative of future results.

This is not a recommendation, offer, solicitation of an offer, or advice to buy or sell securities by Forge Securities LLC (“Forge Securities”) or any of its affiliates, nor an offer of brokerage services in any jurisdiction where Forge Securities is not permitted to offer brokerage services. Registered representatives of Forge Securities do not (1) advise any party on the merits of a particular transaction; (2) assist in the determination of fair value of any security; or (3) provide legal, tax, or transactional advisory services. Securities and investments are offered only to customers of Forge Securities, a registered broker-dealer and member FINRA & SIPC. Securities referenced in this article may be offered by Forge Securities, and certain Forge affiliates may act as principals in such transactions. See Forge Global, Inc. and its affiliates’ Disclosure Library (Disclaimers & Disclosures and Form CRS) for additional disclosures.

Forge Price™ is calculated and disseminated by Forge Data LLC (“Forge Data”). All rights reserved. Forge Price™ is designed to reflect the up-to-date price performance of venture-backed, late-stage companies. Forge Price™ is determined based on a proprietary model incorporating the pricing inputs from primary founding round information and secondary market transactions, including indications of interest (IOIs).

Secondary market transactions are sourced from Forge Securities, a leading market platform, and data collected from other private market trading platforms. The Forge Price™ is a mark of Forge Data. The Forge Price™ is solely for informational purposes and is based upon information from sources believed to be reliable, however Forge Data makes no assurance as to the accuracy or reliability of this data. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset or asset class. Private company securities are highly illiquid, and the Forge Price™ may rely on a very limited number of trade and/or IOI inputs in its calculation. Brokerage products and services are offered by Forge Securities, a registered broker-dealer and member FINRA/SIPC.

Neither reference to company names, nor calculation of Forge Price™ for a particular company(ies) implies any affiliation between Forge or its affiliates and any company, any endorsement or sponsorship of Forge or its affiliates by any company or vice versa, or any partnership, joint venture or other commercial relationship between Forge or its affiliates and any company. Rights with respect to any company marks referred to herein are, as between Forge and its affiliates and such company, owned by the company.

The information contained herein is based on currently available information, and Forge undertakes no obligation to update any of such information or to reflect new information or the occurrence of unanticipated events, except as required by law. While Forge believes such information forms a reasonable basis for the contents of this Private Market Update, such information may be limited or incomplete, and this content should not be read to indicate that Forge has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. This Private Market Update contains trademarks, service marks, trade names and copyrights of Forge and may contain those of other companies, which are the property of their respective owners. The use or display of third parties’ trademarks, service marks, trade names or products is not intended to, and does not imply, a relationship with Forge or any of its respective affiliates, or an endorsement or sponsorship by or of Forge or such affiliates. Solely for convenience, some of the trademarks, service marks, trade names and copyrights referred to in this Private Market Update may be listed without the TM, SM, (c) or (R) symbols, but Forge will assert, to the fullest extent under applicable law, the right of the applicable owners, if any, to these trademarks, service marks, trade names and copyrights. The performance of the Forge Private Market Index with respect to the growth of $10,000 shown herein does not represent the performance of any actual investment, as you cannot invest in the index, but rather reflects the hypothetical growth of a $10,000 investment in a basket of securities based on the index. Additionally, the chart assumes reinvestment of dividends and capital gains in the constituent securities but does not reflect any fees or commissions that may be incurred in purchasing or selling such securities, which would lower the figures shown if included. Further, $10,000 may not be a sufficient amount to invest simultaneously in all securities contributing to the performance shown, which would further prevent an investor from matching the performance shown. The performance shown represents past performance, and past performance is not indicative of future results.

The Forge Private Market Index is calculated and disseminated by Forge Data and is a mark of Forge Data. All rights reserved. The Forge Private Market Index is solely for informational purposes and is based upon information from sources believed to be reliable. It is not possible to invest in the Forge Private Market Index, and Forge Data makes no assurance that any investment products based on or underlying the Forge Private Market Index will accurately track index performance or provide positive investment performance. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset classes or investment vehicles. This is not a recommendation, offer, solicitation of an offer, or advice to buy or sell securities by Forge Securities LLC (“Forge Securities”) or any of its affiliates, nor an offer of brokerage services in any jurisdiction where Forge Securities is not permitted to offer brokerage services. Registered representatives of Forge Securities do not (1) advise any party on the merits of a particular transaction; (2) assist in the determination of fair value of any security; or (3) provide legal, tax, or transactional advisory services. Securities and investments are offered only to customers of Forge Securities, a registered broker-dealer and member FINRA & SIPC. Securities referenced in this article may be offered by Forge Securities, and certain Forge affiliates may act as principals in such transactions. See Forge Global, Inc. and its affiliates’ Disclosure Library (Disclaimers & Disclosures and Form CRS) for additional disclosures. Private company securities are highly illiquid, and the Forge Private Market Index may rely on a very limited number of trade and/or indication of interest inputs in its calculation. Brokerage products and services are offered by Forge Securities, a registered broker-dealer and member FINRA/SIPC. By downloading this content, you acknowledge that you have reviewed and are subject to the Forge Private Market Index disclaimers and disclosures which contains other important disclaimers, disclosures and restrictions related to the Forge Private Market Index. Additionally, if you are accessing this content away from forgeglobal.com, you acknowledge that you have reviewed and are subject to Forge’s Terms of Use with respect to use and distribution of information as if you were accessing this content on forgeglobal.com.