Market for Secondary Liquidity Is Still “Heating Up,” Carta Liquidity Report for Q1 2022 Reveals

According to Carta data, the market for secondary liquidity “is still heating up.”

Carta recently shared what they know:

  • Q1 2022 saw a 57% increase over Q1 2021 in the number of secondary deals
  • Dollars transacted rose $357M (+95%) over the Q1 2021 total
  • Most (51%) of the liquidity programs executed over the past year were completed by companies at Series D and above

Seasonality is “a factor in the private secondary market, and the first calendar quarter tends to be the slowest,” the update from Carta noted.

While it’s too early to know if 2022 will be a record-breaking year, Q1 results “put 2022 on track to exceed last year’s records for the number of secondary deals and total dollars transacted.”

The report further revealed:

“Several factors have combined to fuel the continued rise in secondary liquidity. Q1 2022 saw the slowest U.S. IPO market in six years: Just 18 companies listed on the public exchanges last quarter, raising $2.1 billion in investment capital. Amid underperformance by the 2021 cohort of IPOs, public market turbulence, and gloomier forecasts for global economic growth, private companies are largely avoiding public listings. To help employees and early investors access liquidity, more companies are instead turning to secondaries.”

The report added:

“Meanwhile, venture-backed companies are feeling the first symptoms of a comedown from last year’s fundraising high: Primary financing has declined each quarter since last year’s Q2 record. “

This creates opportunity “for the buy side: Some investors believe the slowdown will allow them to acquire stakes in high-growth companies at a discount from their last primary rounds.”

This quarter, the median discount “was 2% higher than the median for 2021 — it’s a trend we’ll continue to watch.”

Available data shared by Carta shows that “in the 12 months ending in March 2022, 33% of liquidity programs were by companies with a $1-2.5B post-money valuation, with somewhat more liquidity programs at companies that were smaller than this, as compared with larger”.

Companies of all sizes are “pursuing liquidity,” and Carta data shows “a similar median post-money valuation for companies holding secondaries this quarter: $963M in Q1 2022, as compared with $1.04B in the first quarter of last year.”

For more insights into this evolving market, you may check out Carta’s Q1 2022 liquidity report.

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