The private-market equity marketplace is a gamble that unicorns will remain illiquid
Forge global will begin trading today on the New York Stock Exchange, having completed the merger with Motive Capital Corp as part of a SPAC combination. Marketingwithanoy handled the blank check when it was announced last September. Our first look at the deal stats is here.
To say that the IPO market has changed since September of last year is an understatement; the pace of public offerings from tech startups has slowed to a crawl in the wake of a sharp price rally in the value of tech stocks since the highs of late 2021. Richly valued private companies that may have been targets of IPOs have announced plans rolled back and the number of new S-1 applications is minimal.
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This makes the timing of Forge’s public debut illustrative. The combination of the company and the IPO will immediately provide a data point as to market interest in such deals, and the company’s stock price will also, to some extent, reflect the level of investor optimism in other companies not listed. to go.
Let me explain. Forge operates a private equity market – basically shares in unicorn startups. And because the company’s business model is largely transaction-based, the more people who buy and sell stocks, the more money Forge makes.
Optimism about the future of the company is therefore based on a high supply; too many IPOs would limit the availability of shares in popular companies in the private market, limiting Forge’s growth prospects.
The irony is this: The better Forge does when it trades today, the more likely it is that other tech companies will get out of the bank and — again — consider the public markets. If they do, the law could limit Forge’s market by reducing the number of unicorns that investors would like access to, but would not normally be able to do given their standing in the private market. We’ll talk more about this in a moment.
However, the tensions between Forge’s success in the public market and the pool of companies it wants to list in its private market are modest when compared to the sentiment impact of the company’s underperformance and the cash flow from its SPAC deal. So let’s talk hard numbers before we go too far in our market theories.
Cash, growth and guidance
In its SPAC investor deck, Forge said it would raise about $123 million in 2021 and $151 million in 2022. But since we’ve seen some SPAC combinations miss guidelines, we’re going to check Forge’s 2021 current affairs to see not only how the company fared, but how it performed compared to previous guidelines.
Here’s what the company reported on 2021 revenue earlier this year and what it expects for 2022, based on its most recent data: