- Tuesday was the first day of trading for the Forge Global private market on the public markets.
- Forge CEO Kelly Rodriques told Insider the new capital will be used to expand globally.
- He predicts that there will soon be more investors, data and liquidity in the private markets.
Massive unicorns like Instacart and Stripe have been outscored by some of the world’s biggest investors, but that doesn’t mean private markets are in trouble, according to Forge Global CEO Kelly Rodriques.
Investors seem to agree with his optimism.
Rodriques’ company began public trading on the New York Stock Exchange under the symbol FRGE on Tuesday, making it the first private market to be accessible to average investors and ended the day up 57%. The company raised $215 million in its public debut and plans to invest the money in expanding its private equity market to other countries and other investors.
“Private market acceleration relies heavily on access,
and transparency,” he said.
in public and private markets, Rodriques said there is a strong demand for private companies and advanced markets to trade them.
“We believe this is a market that can be extended” to non-accredited investors, he said. He pointed to the “irony” that employees of start-ups, who receive shares of their company as part of their compensation, are already allowed to sell their stakes on Forge and other platforms despite not being often not accredited investors themselves.
“These people probably know more about private markets than their financial adviser, who would be more likely to be considered an accredited investor,” he said. The Securities and Exchange Commission limits certain investments, including betting in private companies, to people with incomes of $200,000 or more, as start-ups are considered riskier than an established public company.
But more and more institutional investors, from mutual fund giants like Fidelity to hedge funds like D1 Capital and Coatue Management, are looking to the private markets for their biggest winners, and smaller retail investors are pushing for to access. The rush for SPACs, which take start-ups public through acquisitions, by retail traders shows how desperate small investors are to gain access to these markets.
Still, private company holdings sold 10% less on Forge in February than in the fourth quarter on average, according to a new report from Forge, which Rodriques says is the nature of the volatile market they operate in. . Investors, similar to those in public markets, understand that companies will not always go up.
Some of the biggest hurdles for weary investors now are transparency (private companies aren’t required to disclose financial information like their public counterparts) and data. Several upstart data companies are hoping to bridge the information gap, including a service from Forge itself that could lure skeptical investors into the space.
Morningstar, for example, is increasingly engaging its users in private markets. Pitchbook, the private equity-focused data provider that Morningstar bought in 2016, was the biggest revenue product last year for the Chicago-based data conglomerate.
In the meantime, Rodriques is touting his company’s freshly public shares as a way for unaccredited investors to gain exposure to private markets, because Forge’s fate is so closely tied to interest in start-up stakes in general.
But he warned that the volatile market requires a different kind of investor than a typical public company.
“Patience and the willingness to endure the risk are needed,” he said. “An investor in this type of market has to be okay with that.”