The tortoise and the hare ... and the unicorn

The old fable of the tortoise and the hare teaches us that slow and steady wins the race, and this holds true year-to-date when looking broadly across the public and private equity markets. Comparing between their animal likenesses, the “creep” of tortoises might be represented by the Dow Jones Industrial Average 30, the “drove” of hares could be seen as the Nasdaq, and the “blessing” of unicorns entering the race would be represented by the ApeVue50. 

With private company secondaries underperforming the Nasdaq’s 24.47% loss through the end of August, and well below the 13.29% declines of the Dow30, it is worth also exploring how different pockets of the opaque private markets are pricing following a prolonged period without primary funding round news.

Unicorns, a term for privately held startups with a value of over $1 billion (as determined by a funding round), are fighting to maintain their namesake status in 2022. Despite headlines of new unicorns being crowned this year, there are instances where secondary market activity is reflecting future funding events will be down-rounds below the perceived relevance of unicorn status.

On average, the most active 50 private company stock secondaries are pricing down 29.85% year to date (through August 31), as tracked by ApeVue. Further, private data can be used to review performance by business sector, funding round, funding amount, or regionally. The most watched Bay Area, California, region has always been a hotbed of activity, producing now public names like AirBnB and Snowflake in the past few years. The lesser lauded, but increasingly respectable Israeli unicorn ranches have produced major players such as Rapyd, Snyk, Deel, and Via Transportation; these companies’ 2021 funding rounds exceeded $25 billion when combined, according to calcalist.co.il.

The above chart references the most active Bay Area and Israeli companies by depth of secondary market bids, offers, and trades. With prominent Israeli companies faring better, but more thinly quoted, it is to be seen if their losses catch up to the broader market or recover faster.

Beyond pricing data alone, available liquidity for companies in the same sector varies massively. For instance, opened bids in the month of August for payments-focused companies ranged from $20 million in bids for Israel’s Rapyd, $184 million for the Bay Area’s Stripe, then jumping to many billions of dollars when you compare to publicly traded comparables like Block ($SQ) and PayPal ($PYPL).

By no means should we accept the illiquidity of private late-stage markets to be perfectly reflective of valuation trends by sector, stage, or region, but they are becoming more reactive to animal spirits than ever before. Transparency will boost accessibility to trading volumes, even if it isn’t boosting share prices this year. 

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