Private Company Secondary Market 2018 Retrospective: Private company sponsored liquidity programs are thriving

By Nasdaq Private Market team

February 2019

Nasdaq Private Market (NPM) experienced record-setting growth in 2018, proving that private company secondary activity is not only commonplace — it is thriving. Annual transaction value almost quadrupled year over year to $12 billion. For the first time, private company tender offers involving a third party purchaser outpaced company repurchase programs. Total programs also increased to 79 as NPM’s client base grew significantly, attracting more new clients in 2018 than its total number of clients the year prior.

In this report, we will dive into a stand-out year in the private market, highlighting data we have collected as a leading provider in private tender offers and company repurchase programs and outlining themes that have emerged.

2018 easily surpassed 2017 as NPM’s biggest year yet, with $12 billion in transaction volume, which was driven by multiple billion-dollar transactions, a new high-water mark in private company secondaries. The overall median transaction size dipped slightly to $17.4 million as more companies, either earlier in their lifecycle or on a repeat basis, offered primarily employee focused liquidity. Since its inception in 2013, NPM has facilitated more than 230 transactions for private companies, facilitating $19 billion in transaction volume, and supporting over 24,000 shareholders.

“Private companies see the advantages in Nasdaq Private Market’s experience, client service, and sophisticated buyer network. By taking a proactive approach to structured liquidity programs, our clients can give their employees and investors an opportunity to realize value during the pre-IPO stage of their corporate lifecycle. We experienced record growth in 2018 as private companies look to our market-leading technology and expertise for their secondary liquidity programs,” said Eric Folkemer, head of Nasdaq Private Market.

Growing client base

NPM’s client base as well as the industry for private company liquidity overall are expanding thanks to NPM’s market-leading technology and client management service, in which each company program has dedicated specialists to assist the company with the transaction design, implementation, and process before, during and after the program.

Repeat clients rose to 22, indicating a strong demand for recurring liquidity programs, and the 49 new clients in 2018 surpassed last year’s total number of clients. Almost half of all of the client transactions in 2018 were by companies 10 years or older, and the median funding stage was Series D. While approximately 38 percent of programs were for unicorn-valued companies, 82 percent of those transactions were valued at less than $50 million, which demonstrates the control companies have over selectively offering liquidity to their employees or investors.

The diverse range in company maturity illustrates how NPM serves private companies at every stage of their lifecycle. Many companies are staying private longer, thanks in large part to the JOBS (Jumpstart Our Business Startups) Act of 2012, which changed the threshold at which an issuer is required to register a class of securities with the U.S. Securities and Exchange Commission from 500 shareholders to 2,000 shareholders.

NPM works with companies of all sizes and ages, but conducting liquidity programs at a younger stage in the company’s lifecycle has become a noticeable trend. Indeed, the most significant shift in the private company secondary market is that companies are thinking about liquidity much earlier. While the median age of a private company has been 10 years over the last two years, we have found that the most common age range of companies coming to NPM in the past year to conduct their liquidity programs were six- or seven-years-old.

The more mature companies, typically around 10 years old, are coming to NPM for recurring liquidity as an alternative to liquidity through an initial public offering, or as a means to test pricing and buy-side demand.

NPM is also working with mid-range companies in three general areas: rewarding employees; cap-table cleanup of misaligned shareholders; and, finding a strategic investor via NPM’s investor network product to help carry them toward the next step in their company lifecycle. In addition, younger companies are using NPM’s platforms to reward employees, to broaden their connections to attract new investors, and to better recruit and retain talented employees by becoming competitive in the marketplace.

Still, no matter the age of the company, employees are a core focus of the liquidity programs. With employees eligible to participate in 89 percent of all transactions in 2018, companies are using controlled liquidity as a tool to not only recruit and retain professionals, but also to reward them.

Secondary demand following primary mega-rounds

Demand for a secondary program is rising as companies are taking a more proactive approach to liquidity planning than in previous years, with over 50 percent of companies completing a program within four months of a recent financing round. Considering that it can take about two months for the average program to go from launch to close, many companies are conducting programs immediately following a funding round, often leveraging newfound demand or funds from a recent primary raise. It is not uncommon for companies to contact NPM before their primary rounds have concluded to begin planning their next liquidity program.


As financing rounds continue to climb and competition to invest in high quality, high growth private companies increases, $100 million “mega-rounds” are becoming increasingly common. In 2018, NPM supported multiple tender offers with transaction values of greater than $1 billion.

NPM is capturing more large-scale business due to buyers who do not achieve their desired allocation in the financing rounds and look to accomplish that via secondaries. There are also companies growing their employee base or raising large rounds at a later stage that need to provide liquidity to a large pool of shareholders. These companies look to NPM for its streamlined technology, regulatory experience and operational integrity.

Historically, we have seen shareholders take substantial discounts for a secondary sale of common shares from the preferred share pricing during a recent capital raise. We also found that in the past, the discount assigned to common shares in the secondary market was relatively small. When the markets are strong, NPM sees secondaries closer to preferred, which through 2018 for NPM was a median discount of 6.6 percent.

In 2018, we saw a meaningful shift in the primary driver of secondary activity in the market to third party purchasers from buybacks. This shift reflects two trends: 1. the continued strength of the private sector and investor demand; and 2. more companies taking an arms-length approach to pricing and allowing outside investors to determine pricing rather than the companies themselves. With the increasing demand and sophistication of both employees and investors and the market moving towards more fair market pricing, NPM is seeing growing interest in auction formats rather than tender offers. NPM’s technology, infrastructure and processes supported multiple auctions last year. We anticipate even greater demand for the auction format from companies in 2019.

Institutional dry powder fuels third party programs

2018 was the first year that the number of transactions involving a third party purchaser was greater than the number of company repurchase programs. NPM’s third party purchaser transactions jumped to 46 in 2018, surpassing the 33 buybacks, and up from 13 third party programs in 2016.

Programs with a third party purchaser were more successful in satisfying the desired allocation of the buyer, with a median 81 percent of the total offering value transacted by participating sellers, as compared to company repurchases at 64 percent.

Institutional investors are fueling third party purchase programs as buy-side demand for private companies grows. Nearly a third of NPM’s institutional buyer network consists of venture capital firms, roughly one quarter are growth equity firms, and private equity and asset managers are each 17 percent of the buyer network.

NPM is providing access to its accredited buyer network comprised of experienced institutional investors actively seeking new secondary investment opportunities. In 2018, members of NPM’s buyer network completed over 400 new investments, marking over 1,000 active investments in the general marketplace.


NPM’s exponential growth in 2018 suggests that the private company secondary market is flourishing. As mega-rounds and venture capital funding continue to reach record levels, investors, company executives, and founders are focused more than ever on capital deployment and bringing liquidity to private companies. NPM’s innovative technology and expertise in client management and liquidity programs deliver the solutions that investors are looking for to more private companies and private funds than ever before.

Please contact your team at Nasdaq Private Market with any questions about our report or to discuss market trends and how we can partner with you on your secondary programs.

Download the Private Company Secondary Market 2018 Retrospective Infograph here.


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Investing in private company stocks is speculative and involves a high degree of risk. You must be prepared to withstand a total loss of your investment. You are strongly encouraged to complete your own independent due diligence before investing in private company stock, including obtaining additional information, opinions, financial projections, and legal or other investment advice.

The Nasdaq Private Market, LLC, is not (A) A registered exchange under the Securities and Exchange Act of 1934; (B) A registered investment advisor under the Investment Advisors act of 1940; or (C) a financial or tax planner, and does not offer legal, financial, investment or tax advice to any user of the Nasdaq Private Market website. Technology services may be offered by the Nasdaq Private Market, LLC’s wholly-owned subsidiary, Secondmarket Solutions, Inc. Securities-related services offered through NPM Securities, LLC, a registered broker-dealer and alternative trading system and SMTX, LLC, a registered broker-dealer, each of which is a member FINRA/SIPC and wholly-owned subsidiary of the Nasdaq Private Market, LLC. Transactions in securities conducted through NPM Securities, LLC and SMTX, LLC are not listed or traded on the Nasdaq Stock Market LLC, nor are the securities subject to the same listing or qualification standards applicable to securities listed or traded on the Nasdaq Stock Market LLC.

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