Q3 private market valuation trends

Andrew AldenCFA, Director of Quantitative Research, Forge

Looking under the hood of index performance, this next chart shows the percentage of index companies that were priced up, down, or flat for the quarter.

What's interesting in this recent quarter is that we still don't see an overwhelmingly strong performance from all companies underlying the index. On the one hand, the percentage of companies with negative returns did continue to decline. Only 41% of index companies had price declines in the quarter, and this was the lowest percentage since Q4 2021. However, the percentage of companies with positive index performance actually dropped a little in Q3 versus Q2 as well. Only 25% of companies were priced up.

So, what's the story here? In short, average positive performances outpaced average negative returns. Winners won more than losers lost. This showed up in a variety of ways, not exclusively in secondary market pricing. It also showed up in the form of some successful exits. Klaviyo and Instacart were both in the index holdings before going public. Klaviyo in particular generated a positive 82% performance from its last private price to its first public closing price.

Q3 was an interesting one for the competing forces of: one, a trend in improving markets; and two, a recent return of some caution toward the end of the quarter.

Looking first at the trends in trade premium discounts, after ending Q2 with a median spread of minus 52%, in Q3, premium discounts bounced around.

Hitting first, a recent high of minus 50% discount in August, before falling again in September to a discount of minus 63%. In July and August, we also saw premium discount improvements at the 75th and 90th percentiles, as companies at the 90th percentile even traded at a 51% premium in August before falling again in September to end the quarter at a 20% discount.

While there's invariably some noise in those metrics, one of the things that was clearly shown in these numbers is the tail of those two quarters. First, some strength followed by the return of some caution.

Turning to our indications of interests or IOIs data, what we saw was directionally similar to what we saw in trade premium discounts. But the IOI data perhaps puts an emphasis on caution rather than fear when looking at the September market.

Where bid/ask spreads had briefly hit a high of 30% in April of this year, by the end of Q2, they dropped to a more modest 18% and that downward trend continued in Q3. In August, they hit a recent low at 12% before moving up modestly to end the quarter at 15%. This put the spread just slightly above the historical average spread of 14%. Once again, a sign of caution, but hardly fear.

The last data point I'll touch on as it regards to trading activity is our Right of First refusal or ROFR data.

Here we saw signs of continued strength as the percentage of companies with insider buying remained elevated in Q2, following a similarly strong Q1. On 22% of companies traded in Q2, the Right of First Refusal was executed, and company insiders purchased the shares from the seller at the previously agreed upon trade price.


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 (“FSEC”) or any of its affiliates, nor an offer of brokerage services in any jurisdiction where FSEC is not permitted. Registered representatives of FSEC 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 to customers of FSEC, member FINRA & SIPC. See Forge’s Disclosure Library (Disclaimers & Disclosures and Form CRS) for additional disclosures.

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 Investment Outlook, 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 Investment Outlook 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 Investment Outlook 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 LLC ("Forge Data") and is a mark of Forge Data. 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 returns. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset classes or investment vehicles. 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. Please see Forge Private Market Index Disclaimers & Acknowledgments for other important disclaimers, disclosures and restrictions related to the Forge Private Market Index that you acknowledge by downloading this content and to which you are subject. References to "Returns" in the context of the Forge Private Market Index Price are hypothetical in nature. The percentages displayed indicate the per-share change in percentage in the Forge Private Market Index Price of the applicable constituent, rounded to the nearest tenth of a percent unless otherwise indicated.