If a stock falls in private markets and no one is around to hear it, does it make a sound?

Unlike public markets, or even crypto markets, where trades can execute algorithmically in milliseconds, private equity markets remain largely opaque. Clarity is generally discoverable in the headlines with gigantic funding-round announcements at sky-high valuations, but such a flow of news has dissipated in 2022. The dearth of announcements this year has been supplanted by news of layoffs along with even painful down rounds and financings with complex term structures to veil public optics.

In lieu of nine-figure primary rounds, there has been an increased focus on the liquidity supported by private stock secondary trading activity. Using market-driven inputs observed by buyers and sellers in between funding rounds, the secondary market starts to paint a picture of where valuations have gone. ApeVue, a service provider for secondary-market driven pricing data, has seen valuations slashed across most all major unicorns (those with valuations over $1 billion), with the most pain being inflicted in entertainment-, fintech-, and blockchain-sector stocks.

As in public markets, blockchain and decentralized finance (DeFi) continue to make private market headlines this quarter. As shown below, Bitcoin’s price decline is a worthwhile time-series to compare to the exchanges hosting a considerable amount of its flow. Since April 1, Blockchain.com (private), Kraken (private), and Coinbase (public), are down 70.82%, 55.63%, and 66.84%, respectively, while the overall cryptocurrency market itself has declined 48.75% over the same period.

As shown (fig. 1), Coinbase took a larger immediate drop in price in April into May, while its private counterparts fell with some delay to the public market. Only in July did ApeVue see a closer convergence in negative returns of the three companies, representing the private markets’ slowed reaction to overall downward trends in the market.

More generally in the private markets, declines have followed the public market woes at a slower pace. The wider array of the 50 most active private stocks, represented by the ApeVue50, continued abating the full woes of public markets through the first and second quarters, but has now finished July year-to-date down 28.28%, compared to the Nasdaq’s fall of 20.80% following a strong rebound this past month (fig. 2).

With the number of market participants in the private markets having grown considerably over the past decade, there is a significant focus on what transparency brings and if there is ample liquidity for new institutional participants as sky-high primary funding rounds (and private secondary markets) reset following the more broadly publicized public market declines.

ApeVue provides objective, composite pricing information and benchmarks on more than 100 late-stage, non-public companies. Price data from ApeVue is constructed from a consortium of institutional private market brokers, who contribute key metrics about liquidity in the secondary market for unicorns—most importantly the trade prices and institutionally-sized positions they continue to broker in. The composites created add transparency to a rather opaque segment of the market, where price discovery, risk monitoring, and timely valuations are a challenge.

To our readers:

While WatersTechnology is a publication focused on the technology and data used by firms dealing with the wholesale capital markets, each month we will use data provided by ApeVue to provide a snapshot of certain private-market sectors, with a focus on financial technology and (yes) even crypto. While the latter is not a main focal point for our coverage, we believe our readers will benefit from having a data-driven snapshot of where the market stands from month to month. Over the course of the year, we will look to add more datasets and snapshots that help highlight our daily coverage. If you think we’re missing something, please let me know: anothony.malakian@infopro-digial.com

Anthony Malakian
Editor-in-Chief, WatersTechnology Group