Charlie Grimes, Managing Director and Head of Forge Global Capital Markets, and Sally Mace, Principal at Forge Securities, discuss the premium and discounts at play on the Forge platform.
Transcript
Now, we saw at the end of 2022, trades on Forge’s platform were closing in an average of 50% discount to the company's last primary round valuation. So, what are some of the trends in terms of pricing and valuation that you're seeing out there in 2023?
I think that 50% discount speaks to the broader trend of what we're seeing in the market.
And I'll sort of back up just to put that in context. In 2020 and 2021. We were seeing on average companies trading at a premium to their last funding rounds. So, a company would have gone out raised venture funding and almost immediately traded above that valuation in the secondary market. We haven't seen that in well over a year now and that 50% discount is on average what we're seeing relative to companies’ last rounds.
I will say that the most important thing that we're hearing from investors is that they're looking at each company on a case-by-case basis and not applying any sort of broad discount to an entire sector or asset class. There may have been companies that raised well over a hundred X revenue multiple last year. And even if that company is trading at that average 50% discount, it may be still quite over overvalued or too rich for some investors.
So again, it's important to look at each company case by case, and additionally, considering the illiquidity discount that those investors are expecting on top of that 50% discount that you mentioned, Charlie. So those two factors combined are largely how investors are looking at pricing sort of one relative to their public comps and two the additional illiquidity factor that applies to our asset class.
And in some sort of taking all of this together, I think what our trading desk and the data offers is great insight into how companies are trading, where buyers and sellers are positioned in the market and how to think through and get smart on the topic.
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.
To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.
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. Past performance Is not indicative of future results.
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.
To the extent information about or defining specific terms is provided herein, Forge makes no representations as to its accuracy and has no duty to update such information. Such information is based on Forge’s experience and the meanings and connotations of terms as Forge typically uses and interprets them. Others may construe such terms differently, and you should do your own research and consult with financial, legal and tax professionals regarding any such concepts included herein.
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. Past performance Is not indicative of future results.