The IPO market is decelerating in 2022
It doesn’t take an expert to notice that the IPO market has been decelerating in 2022. According to EY’s recently released 2022 Global IPO Trends report, there have been 630 IPOs YTD in 2022, raising US$95.4b in proceeds, reflecting YoY decreases of 46% and 58% respectively. After a record year in 2021, the IPO market has seen a drop in momentum due to a vast increase in market volatility. Between the heightened inflation uncertainty, global instability, and investor pullback across sectors, a number of IPOs have been postponed this year. Private companies continue to wait for a market revival with some considering adjusting their valuations to reflect the broader correction in the public markets.
What does this mean for employee equity holders and shareholders at pre-IPO companies?
With the slowdown in IPO momentum, an exit event for employee option holders or shareholders may seem further out than previously expected. Additionally, as investors re-price pre-IPO rounds at discounted valuations, often with more onerous terms, employees could face increased dilution and markdowns in their equity. But life happens – you may need to access liquidity now to seize opportunities, safeguard your future, or achieve lifelong dreams or goals. Without a clear understanding of when their company might complete an IPO, employees (especially those early on) don’t know when they can expect to receive liquidity for their shares and might assume that selling or entering into recourse term loans are their only alternatives.
How to access personal liquidity when markets are volatile
Personal liquidity needs tend to take a back burner in times like these–but they don’t have to. At Liquid Stock, we have solutions to help you access liquidity for your private company equity without having to wait for an IPO. Unlike a loan, our solution does not require a personal guarantee nor does it require the sale of your shares. The Liquid Stock non-recourse structure can also provide substantial tax savings (reducing risk and maximizing upside).
How you can benefit from the Liquid Stock Solution
We give you the money needed to exercise your options early and potentially benefit from preferential tax treatment, without requiring repayment above the value of your shares1, even if your company goes belly up, or does not successfully IPO. Our experienced team members have worked with private company shareholders and option holders through several market cycles and have first-hand experience navigating volatility. Our solutions can help you stay focused on your goals and long-term success, no matter the current state of the markets.
1As used herein, “non-recourse” means that a transaction counterparty is not personally liable for the difference between the value of the advance made to the counterparty and the value of the collateral shares upon a liquidity event or upon such other time(s) as defined in the transaction agreement, if the value of the collateral shares is less than the advance or other amount owed. In Liquid Stock transactions, the Counterparty will be personally liable in certain enumerated “Events of Default” defined in the applicable transaction agreement. These events include but are not limited to, failure to pay amounts owed under the agreement when due, breach of representations and covenants, and transfer of collateral shares in violation of the transaction agreement. Following such an “Event of Default” a transaction counterparty may be personally liable for the entire amount due under the agreement, even if it exceeds the value of the collateral shares.
This blog post is intended for general informational and education purposes only. Liquid Capital Management, LLC (together with its affiliates, “Liquid Stock”) makes no representations as to the accuracy of information in this post, and no representations or guarantees as to specific outcomes from relying on this post. No content in this post is intended or should be construed as tax, investment, legal or accounting advice by Liquid Stock, or as an offer to sell or solicitation of interest to purchase any securities offered by Liquid Stock. Liquid Stock does not provide tax or other financial, legal or regulatory advice to its transaction counterparties. While reasonable steps have been taken to ensure that the information herein is accurate and up to date, no liability can be accepted for any errors or omissions. All views and information contained herein are as of the date hereof and subject to change. Information contained in third-party links has not been independently verified by Liquid Stock and inclusion of such links should not be interpreted as an endorsement or confirmation of the content therein. Prospective investors considering an investment in a Liquid Stock fund should not consider this content as fund marketing material.