Lately I have been getting a lot of cold emails from brokers who are trying to sell me private company stocks. These are secondary transactions where the existing shareholders try to shed their current holdings. I suppose there are probably not that many buyers as risky and illiquid assets are currently out of favor and cash is king.
Forge Global published their November Private Market Update and confirmed that through 10/31/2022, private company shares traded on the Forge platform at a 47% median discount to their last primary round, and discounts to the last primary have grown steadily since January of this year. Hiive Market’s most recent report also indicated private transactions are traded at a 39.5% discount to the last primary round on average and there are twice as many sell orders as buy orders on their platform.
Overall, it is no surprise that the private secondary markets are mirroring the public stocks’ performance. QQQ 0.00 is down 30% YTD and WCLD 0.00 is down 45% YTD. The ~45% downtick of illiquid and less stable private companies actually seems modest considering the risks. I wouldn’t be surprised if private secondaries go down another 20+%. I believe 2023 will be an even tougher year for startups and many startups are going to fail, including several formerly high flying unicorns who overspent or have problematic business models or both. But chances are good opportunities will be more abundant and I am looking forward to investing in startups that hopefully will flourish in 5+ years.