Private Company Valuations Show Signs of Recovery

Secondary trading platforms for private company shares say that prices and buyer interest are on the rise.


Illustration by II

Private market valuations are finally showing signs of life after last year’s downturn.

Private company stocks are now trading at levels that are close to the valuations achieved during their second-most recent funding rounds, according to Kelly Rodriques, chief executive officer of the private market trading platform Forge Global. Most of the companies trading on Forge held their most recent funding rounds in 2021, a year of record-high private market valuations fueled by low interest rates and high credit availability. Between late 2022 and early 2023, however, valuations fell sharply amid deteriorating macro conditions.

“We are seeing some indications that things are improving,” Rodriques said. For example, when employees try to sell their stock to a third party, private companies often retain the right to step in and buy the shares back at the price negotiated by the buyer and seller. Companies usually exercise this right when they see upside potential in their own stocks. In the first quarter, 8 percent of companies stepped in and bought back their own stocks, up from 6 percent in the fourth quarter of 2022 and 4 percent in the third quarter, according to a recent report from Forge.

And institutional investors have also shown a strong interest in buying private market shares over the past six weeks, according to Tom Callahan, CEO of Nasdaq Private Market, a platform that facilitates secondary trading of private shares. “As public markets rallied and investor confidence improved, the private markets re-opened,” Callahan told II. “The prices of some private companies have risen, driven in part by a healing of macro conditions and a return of investor risk appetite.”

Callahan added that he has noticed more orders, tighter bid-ask spreads, and deeper trading volumes on Nasdaq’s platform over the past month. “Our order book is the strongest it’s been in over a year, and that’s very encouraging regarding activity levels in the second half of the year,” he said.

Forge has also seen an uptick in buyer interest in the last month. “Since the end of 2021, we’ve been in a period where there are a lot more sellers than buyers, almost like on a two-to-one basis,” Rodriques said. In June, buyer interest surged to 42.3 percent, the highest in 10 months. Rodriques said that the increase in buyer interest could potentially signal that buyers are more confident about the prospect of successful exits, especially via initial public offerings.


“Once buyers start coming back into the private market, you will then start to see the beginning of the recovery in the IPO market,” Rodriques said. “But 2021 was such an outlier of a year in terms of IPOs. We don’t believe you should expect to see it return to that.”

The recent developments in artificial intelligence could also be a boon for private market valuations. “I think people believe the upside in that space is so great that you should get in at any cost,” Rodriques said. He noted that the valuations of AI companies are so high that they almost seem like an outlier in the private market.

Said Callahan, “Many of the most innovative, disruptive, high-growth companies are private. The average company waits over a decade before going public, so if investors want to capture that excess return they are forced to invest during the private phase of a company’s life.”