Trade volumes on Secondary Markets are down dramatically

While tech companies have historically received high valuations, company shares have been traded below asking price on secondary markets lately. According to secondary markets platform Forge Global, the gap between asking price and bids is currently 22 percent. This has resulted in a dramatic decrease in trade volume.

On secondary market platforms, buyers and sellers can trade pre-IPO company shares. Due to the current market conditions, valuations of many companies have dropped. This results in a very large gap between asking price and bids on the market.

Bid-ask spread of 22%

According to Forge Global, there is a bid-ask spread of 22 percent. “At the same time that you’ve got a lot of activity in sellers, the price that buyers are willing to pay in a period where public tech dropped precipitously has been challenging”, said CEO of Forge Global Kelly Rodriques. “Trade volumes have come down dramatically.”

‘Trade volumes have come down dramatically.’

Last November, companies traded at 47 percent lower compared to valuations set on their recent rounds of funding. Platform EquityZen reported that stocks were trading at an average of 40 percent lower. Additionally, startups have seen their valuations drop, which can result in down rounds where shares become less valuable.

Lower valuations

Tech company Stripe has had its valuation cut by 40 percent in just six months. Instacart was also valued at 10 billion dollars in 2022, which is a strong decrease after its valuation in 2021 of 39 billion dollars. Klarna’s valuation decreased 85 percent to 6.7 billion dollars last year.

‘People who have used their stock options at a startup will be hurt the most.’

“The people who are going to be most hurt are the people who have left and exercised their stock options at the super-hot startup”, said Healy Jones, executive at Kruze Consulting. “When that down round happens, those people are going to be particularly in trouble.”