Public Markets

The Market Minute: When You Want Liquidity But Don’t Want To Wait For An IPO

Illustration of a board game in the style of Chutes & Ladders named The Market Minute.

For many startup employees, it often seems like the only options for liquidating their shares and receiving a payout for their equity in a company is to wait for it to go public or be acquired.

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An IPO or an acquisition are the traditional exit options for venture-backed companies. But in recent years more options have emerged for startup employees and other shareholders to liquidate their shares in the private market, including Nasdaq Private Market and CartaX.

Private markets only really started to take off after the 2012 JOBS Act, according to Eric Folkemer, head of Nasdaq Private Market. The legislation is often acknowledged as a factor in why companies are staying private longer, which understandably leads to pent-up demand from employees and other shareholders to access liquidity when an IPO isn’t on the horizon.

And more companies are embracing these early-exit options. In 2020, Nasdaq Private Market facilitated a record 90 liquidity programs for private companies, with a total program value of $4.5 billion, according to the company’s annual report. Among the companies that have used the Nasdaq Private Market platform are exercise tracking network Strava and continuous integration platform CircleCI.

“What has changed in the market is: One, there’s so much more depth of understanding of the private markets and how they operate, but also the number of investors who have moved into the space has multiplied exponentially,” Folkemer said in an interview. 

High-quality institutional investors are also moving to the private side, creating more buyer-side diversity, he said.

Nasdaq Private Market partners with private companies to offer liquidity options to shareholders. It works with companies to do broad-based tender offers, assess demand and conduct price discovery, including through holding auctions that “mimic public offering Dutch auctions.” 

This way, employees and other shareholders can essentially sell their shares to investors without having to wait for an IPO or acquisition. 

Folkemer thinks every company will eventually offer liquidity before going public, and so far is seeing companies offer liquidity to employees and shareholders annually as a rule of thumb.

Most recently in the space, equity management company Carta rolled out CartaX, its private stock exchange. In January, CartaX held its first auction with its own stock, resulting in $99.7 million in trading volume, according to a Medium post from Carta CEO Henry Ward

Part of the reason for developing CartaX was to help late-stage private companies, which are often at risk of losing talent to public companies, Ward wrote in December.

“If private companies could offer cash, stock, and liquidity, they would win the talent wars with public companies because they could offer the best of both worlds — private company growth curves with public-like liquidity,” Ward wrote. “That lottery ticket startup employees sacrificed for will finally turn from paper wealth to real wealth.”

So, if you’re a startup employee and didn’t already know, you don’t necessarily have to wait for an IPO or acquisition to access liquidity. More companies are offering that option, and there are more solutions like Nasdaq Private Market and CartaX to help them offer it.

What’s coming up

After a flurry of special purpose acquisition company filings, a handful of companies have filed an S-1 for traditional initial public offerings. Coinbase, DigitalOcean and Compass are among the companies that have filed S-1s in the past week, and other companies like proptech startup Doma and risk-management company QOMPLX have announced they’ll go public via SPAC. So expect more coverage, updates, and analysis as the public markets continue to heat up.

As always, if there’s something I should be covering in this column, please email me at 

Illustration: Dom Guzman

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