Nasdaq Private Markets highlights the performance of private securities when compared to more traditional public listings.
The number of public firms has been in decline for years due to aggressive over-regulation and the cost of compliance. Meanwhile, there is an ocean of sophisticated money that wants to jump to the head of the capital gains queue by investing in early-stage private firms. Recent improvements in technology and the growing awareness of private markets have increased activity in the private securities sector. Whether for primary offerings (funding rounds) or secondary transactions, the private markets are becoming increasingly important in the capital formation equation.
NPM shares that their private market tracker, which monitors the 50 largest private firms, the year-to-date increase in value hovers around 58%. Meanwhile, the S&P 500 is up around 11% for the year (after a very poor week).
A good portion of the private markets activity is from the artificial intelligence (AI) sector, which is booming. The YTD return just for AI/Machine learning stands at a whopping 97.4%. Fintech is doing OK at 26.1%, and digital assets/blockchain is performing poorly at a negative (22.2%). The best performers year to date from NPM are as follows:
- Prometheus +524%
- BaseTen Labs +240%
- SambaNova +238%
- Clickhouse +232%
- Cerebras +188%
- Anthropic +173%
- Reflection AI +170%
- SB Technology +143%
- OpenEvidence +140%
- Whoop +137%
It is not just private markets like NPM; many online capital formation platforms and traditional securities crowdfunding have moved into the secondaries market, providing accredited investors with access to private firms.
If all goes well, legislation is in the works to improve access to some of the most compelling early-stage firms working toward an initial public offering. The current definition of an Accredited Investor is discriminatory, limiting access to offerings under Reg D, the largest securities exemption for private offerings. Changes may broaden the definition to include sophisticated individuals, not only those with large bank accounts.
