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With most startups getting repriced behind closed doors, we love getting data that gives us a glimpse of what’s going on. This week, our new information comes from EquityZen, which shared insights on secondary stock sales. EquityZen also put up a few IPO predictions that gave us food for thought. Let’s explore. — Anna
A glimpse of repricing
How do you know when a unicorn has lost its billion-dollar valuation? Usually you only find out long after the fact, when — and if — the company raises a down round that makes it clear that its equity valuation is no longer in the unicorn realm.
The thing is, not many founders want to advertise that they have raised capital at a lower valuation than their previous round; in most cases, they just won’t disclose their new valuation.
As market observers, this leaves us with little data on a topic that our readers do care about: What kind of repricing they could expect. This is why we were grateful for Instacart, which made it public that it reduced its valuation through a 409A price change. This wasn’t good news, but it was a helpful data point for everyone involved. However, that was back in March.
Most of the repricings over the last few months happened behind closed doors, but we do have a trick up our sleeves: secondary transactions, which let people buy and sell private stocks.
According to EquityZen, one of the main secondary marketplaces, the platform saw an average discount of 40% in November compared to the last funding rounds in secondary transactions. And yes, that’s pretty steep.
The flip side is that the lower prices create an opportunity for investors to acquire pre-IPO shares at a valuation that’s arguably a lot more reasonable than what was on offer in 2021 — and at a time when the IPO window might finally be reopening.
IPOs on the way?
EquityZen ventures a few data-backed predictions on tech companies that could IPO in 2023. Here’s its shortlist:
- Semiconductor chip design firm ARM Holdings
- U.S. EV battery maker Clarios
- Vietnamese EV maker VinFast
- Social media platform Reddit
- Corporate food delivery platform ezCater
- Corporate travel and expense management company TripActions
We do love an S-1 here, so it is nice to hear that some companies might finally go ahead with a public listing next year. However, the devil is in the details.
First, several of these companies have been talking about their IPO plans since 2021; in fact, the list looks a lot like what we had in the cards for 2022. Second, a few of these made it clear that they are aiming to go public in Q2 2023 at the earliest.
Few or no IPOs in Q1 will leave us with another quarter to endure quietly, but this isn’t just about us: In the meantime, the unicorn backlog keeps on building, and many companies just won’t survive the stampede.
To borrow a neologism coined by Molten Ventures marketing director James Clark, there will likely be some unicorpses along the way.
One man’s loss is another man’s gain
Clark also previously proposed two other neologisms that I find interesting:
#Goose — Former #Unicorn that has been force-fed too much funding and is now dangerously unhealthy. See also #Unicorpse
#Foigras — The key staff/tech within the Goose. Once liberated from the now dead Goose, makes for a tasty morsel for acquirers.
I am personally more used to duck foie gras, and many at TechCrunch would prefer both to be replaced by lab-grown foie gras, but that’s not the point. The point is that overvalued tech companies could translate into bargains in the next few months, either for secondary stock buyers or for strategic acquirers — and we will keep on monitoring both trends, as well as any IPO-related announcements.