State of the Private Market
Last year, hostile macro forces drove an abrupt and violent revaluation of risk across all asset classes, perhaps felt nowhere more acutely than in the market for private, pre-IPO companies. This meant, for significant periods of 2022, that the private markets were, for all intents and purposes, closed. Liquidity virtually evaporated as bid/offers widened dramatically and sellers vastly outnumbered buyers. Many investors simply moved to the sidelines, awaiting macro stability and greater clarity regarding valuations in the harsh new risk-off reality.
Macro conditions aside, we believe there will be forcing mechanisms in 2023 that could ignite increased private market activity. Investors continue to be attracted to innovative, disruptive, high-growth private companies and new capital continues to flow into this sector. Given the current secondary discounts seen in the market, this year we expect investors to begin deploying capital at a more normalized rate. For asset owners, particularly current or former employees, challenging macro conditions don’t change the realities of life. They still need to buy houses and pay tuitions. Our corporate clients are acutely sensitive to the needs of their employees, and many are engaging with NPM to explore employee-focused liquidity programs in 2023 to provide partial liquidity. As risk managers, many of our investor clients need to re-balance portfolios given last year’s dramatic valuation changes.
2022 Private Market Highlights and Trends
- Private company valuation discounts deepen
- Large increase in market-driven auctions
- Shift back to late-stage software companies
- Shareholder supply continued to outpace investor demand
- Employee participation rates and subscription rates at all-time highs
- Median transaction volume increased
- Investor participation tilted back towards VC firms and away from hedge funds
Download our report to learn more about the ever-changing Secondary Market!