Kelly Rodriques discusses growing momentum in the IPO market on CNBC

Forge Global CEO Kelly Rodriques joined ‘The Exchange’ on CNBC to discuss growing momentum in the IPO market, secondary markets for investment into private companies, and late-stage private market valuations.


Deidre Bosa00:00

And now it is time for today's Tech Check. New momentum for the IPO market recently, the renaissance IPO ETF, which tracks the performance of recent debuts in the public market. It's up 25% year to date despite the drought of listings over the past 18 months and as macro uncertainties persist private valuations, they are still being pressured. They typically lag though. My next guest knows a thing or two about that Forge Global is a secondary marketplace where insiders can buy and sell shares of private companies, including some of the most coveted names like SpaceX, Reddit, and Stripe joining me now and that is Kelly Rodriques CEO, Forge Global.


Kelly, it's great we both happen to be in New York at the same time. So, that's all worked out. I'm interested in particular in late-stage companies. The ones I just mentioned, as well as say Instacart, because that tells us something about the IPO market, right? And sort of their readiness to go, or investors readiness to receive these companies. So, what are you seeing at some of those late-stage names?  

Kelly Rodriques01:00

So, this moment we refer to as the Great Reset.

We just put data out that shows that the ten-year bull that ran through 2021 is now undergoing a pretty massive set of changes, both investors, behavior, and companies raising money and valuations.


Right. So, what do those valuations look like at the late-stage? I remember last year during this Great Reset, Instacart took its own valuation down internally a number of times. Has that been coming back?


Yes. So, overall, the market is off by 61%.


It's important to know, though, that half of the large private tech hasn't raised money in between a year and two years, so, a lot of the discount were based on pricing we saw in 2021. But in the last period, in the last quarter, we've seen some interesting changes. We've seen about a 3% decrease in pricing, which is a significant slowdown, and about 28% of the Forge Private Market Index, which is the 75 most liquid names are actually trading up in Q2. 


Now, we haven't seen this in two years. So, there is a shift underway.


So, that's a signal that maybe it's coming bac?. That there's interest in these companies? Do you think that that will lead? I know we've seen some IPOs, not necessarily in the tech space, but do you think that tech IPOs are next to come back?  


Well, we're watching it. The data suggests there's probably two other data points that I'd mentioned, but in terms of what we saw in Q two on the Index, definitely seeing movement there. We're also, seeing the bid/ask spread now has shrunk to 17%. 


Now, in the private markets, that's still high. Normal, highly liquid periods are around 11% or 12%. But those are down at 17%, coming down from their highs of 26. We're also, seeing ROFRs at two year highs.


So, one of the most active investors at the peak in 2021 was Tiger Global. It was a crossover fund. There was a report recently that it opened up its full portfolio to individual bids in the private markets. Have you seen that?


What does that do to the private markets when such a big player comes onto the scene and looking to sell?


It's a really interesting trend, but it only tells half of the story. When you look at the large institutions that were there buying in 2021. And a lot of new entrants have come into the market in the last two or three years, hedge funds are now fully in the private market.  


No longer tourists.  


Right. So, what you're seeing now is if you invested at those valuations in 2021, if you're looking at those same companies in 2023, you kind of be crazy not to look at buying as well. 


So, yes, there are large players that invested in 2021 selling, but they're also, buying in 2023. 


Last question for you. Any AI startups looking to sell shares on the secondary market? Because it feels like this sort of bifurcation where some of the late-stage have seen their valuations come down, but some of the people I talk to in Silicon Valley complain of a bubble already in AI, in the AI space, for private companies.  


Yeah, it's definitely seeing it's hot moment right now. And like in any other sector, there's lots of lots of names that come out at the beginning and they're usually two or three winners.


So, at this point, you know, everyone wants to buy AI, it's hard to buy.  


Right, okay. Hard to buy even in the secondary markets. Kelly, thank you So, much for being with us. Appreciate it. See you back in San Francisco.

About the Author

Kelly Rodriques has been Forge’s Chief Executive Officer since July 2018. Prior to Forge, Mr. Rodriques served as Chief Executive Officer of PENSCO Trust Company from March 2010 to September 2016. Since September 2016, he has been the Managing General Partner of Operative Capital, an early-stage investor in FinTech companies.

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