PRE-IPO MARKET OVERVIEW
PTN provides its members with access to exclusive investment opportunities. PTN’s structure allows for a seamless investing experience and ability to liquidate positions, pre and post IPO.
Qucik Recap of the PRE-IPO MARKET
- Over the last 10-20 years, private companies around the globe have been staying private longer than ever before.
- Interest rates were near zero for an extended period and there were an increasing number of Angel, Venture, and Private Equity Funds deploying capital, so access to capital in the Private Markets was in abundance.
- The regulatory environment, operational requirements, and costs associated with going public are significant, contributing to companies’ decisions to remain private.
- Unfortunately, most investors are only given an opportunity to invest once a company goes public, which is after a significant amount of growth has taken place in the private market.
- The demand from investors, coupled with shareholders’ need for liquidity created a robust secondary market for shares of private companies.
- While the costs associated with going public remain high, the market dynamics have completely shifted since 2022. Interest rates spiked, late stage VC and PE funds have seemingly disappeared, and the IPO market came to a screeching halt.
- Since mid 2023, the percentage of secondary transactions where insiders and VC firms exercised their “right of first refusal” has increased significantly while the percentage of employees exercising their options has decreased significantly.
- At the moment, smart money is actively investing. This started with insiders and has spread to family offices, high net worth investors, and institutional investors.
- Unfortunately, there are still several issues with the current market dynamics.
Traditional CHALLENGES IN THE PRE-IPO SPACE
Access: Historically, investing in the pre-IPO space was reserved for a limited network of institutional and well-connected investors. In addition to the challenge of gaining access, high investment minimums have priced many investors out of the market.
Burdensome and Inefficient: Once you’ve secured access and have the capital to meet high minimums, there is still a meaningful amount of diligence, paperwork, and expertise needed to finalize your investment. Assuming that goes well and the company goes public, there are operational burdens in terms of tracking, removing restrictions, and liquidating or transferring your position to your brokerage account.
Liquidity: Private markets are plagued by a lack of liquidity and efficient structures that allow for a seamless transfer of ownership.
Trust: When acquiring shares through a special purpose vehicle or fund structure there is an additional risk, counter party risk. This is potentially the most important issue as firms have been caught selling “fake” shares.
Access: PTN provides members with the ability to invest in any of the companies listed on the platform. PTN has developed a network of investors, brokers, and funds to actively source investment opportunities based on member demand and present unique opportunities. We help democratize access by offering a reduced minimum investment size ($10,000 for your first transaction).
Liquidity: PTN’s structure provides members the ability to buy or sell. PTN cannot guarantee that you will be able to buy or sell as there may not be supply or demand, but the mechanism is in place to efficiently transact, pre and post IPO.
Operational Efficiencies: PTN streamlines the process making it easy for it’s members, from initial investment to exit.
Trust: PTN and its affiliates have delivered over $100M of stock/cash to investors. In addition to a 7 year track record, PTN has engaged trusted third parties, who oversee, regulate, and audit PTN.
- Wakefield Quin provides some of the top legal expertise in Bermuda and the Harbour Financial Services division provides fund administration services.
- PTN is regulated by the Bermuda Monetary Authority (“BMA”).
- PTN is audited by Weaver and Tidwell, L.L.P.
Current CHALLENGES & Solutions
- The number of unicorns minted and the valuations many of these rounds took place at from the end of 2020 through the beginning of 2022 was incredible and unsustainable.
- There are lots of great companies and investment opportunities. Unfortunately, a meaningful percentage of the companies that raised capital at astronomical valuations will either go out of business or raise capital at significantly lower valuations than their previous round.
- Recent bankruptcies and the acquisition of Hopin highlight this issue. Hopin was valued at ~$7.75B in 2021 and sold for ~$15-50M in 2023. Acquiring common stock at a 95% discount may have seemed attractive to investors, but this would have resulted in a complete loss.
- Many firms continued to push pre-IPO investment opportunities throughout the downturn and re-pricing, thinking only of the fees they could generate rather than having their investors best interest in mind. PTN was patient and only started presenting new opportunities to it’s members since Q3 2023.
- To avoid situations like Hopin, PTN will only present secondary opportunities where the underlying company has raised a fresh round of capital led by top tier firms since the end of 2022.
- PTN will also present unique opportunities to participate in primary offerings, resulting in fresh capital to the company at an attractive valuation and preferred stock for members.
- Regardless of market conditions and the method of investing, PTN will always work to source investment opportunities requested by members.
Track Record & Previous Exits
PTN and its affiliates have facilitated investments into over 25 private companies over the last 7 years and delivered over $100M worth of proceeds to investors.
Investors have successfully leveraged the platform to sell their shares prior to an IPO. Below are examples of companies that were available on our platform prior to their IPO, where PTN delivered proceeds (shares and/or cash) to members:
Join the Network
Step 1: Account Opening – Members must confirm their status as an accredited investor, review the Private Placement Memorandum (“PPM”), and complete the subscription documents.
Step 2: KYC/AML – As a regulated entity, we are required to conduct KYC and AML checks on all members.
Step 3: Invest – Once an account is approved, members can invest in any of the companies available through PTN on an opportunity by opportunity basis.
We are here to help you navigate the Private Markets. A PTN representative will work with you through the account opening and funding process as well as providing a demonstration of how to use the platform. Members can reach out to the PTN team at any time with questions or requests.