Emily
Editor, Senior Moderator
Source: Financial Times
https://todayuknews.com/market/sili...ffload-start-up-shares-as-valuations-plummet/
todayuknews 3 hours ago
Silicon Valley staff rush to offload start-up shares as valuations plummet
Silicon Valley workers are rushing to offload stakes in tech start-ups through private share sales after a wave of job cuts, compounding a collapse in valuations.
Employees of embattled tech groups are flooding secondary markets — where stakeholders in a private company sell shares to third parties — as the industry’s former darlings such as Klarna and Stripe have been forced into aggressive cost-cutting measures, according to brokers and investors.
For many workers who have lost their jobs, their shares vest within 60 days, forcing them to sell during the worst downturn in a decade. Some companies are offering an extension on this timeframe, according to brokers, although some sellers want to get out of their holdings over fears the market rout will get worse next year.
“We are seeing an inflow of people being laid off trying to sell their shares,” said Greg Martin, managing director of Rainmaker Securities, which facilitates private securities transactions. “These companies have built their headcounts up so much, so there are a lot of people highly motivated to get a sale done.”
Martin added: “In general, we are seeing a 30 to 80 per cent decline in price from a year ago.”
The uptick in sellers is pushing down the price of many tech start-ups, adding to concerns of an industry-wide reset in valuations of fledgling companies as rising interest rates and faltering public technology stocks filter through to private markets.
The rout means it has become increasingly hard to assess a current price for many start-ups. Most have avoided raising money from venture capitalists this year out of fear that they would be forced to accept a lower valuation, leaving few solid indicators of how the wider slump has affected them.
Meanwhile, the informal private secondary markets handled by dealers such as Rainmaker are often highly illiquid, further complicating attempts to come up with an accurate “market” value.
The head of one tech venture capital fund in Silicon Valley said he had received 10 times more offers to invest in companies through secondary share sales this month than usual.
Multibillion-dollar businesses such as fintechs Klarna, Chime and Stripe, ecommerce group Instacart and autonomous delivery group Nuro, have cut 10 to 30 per cent of their staff in the past two months. They have mirrored moves by public tech giants: Facebook parent Meta and Amazon have both announced plans to cut more than 10,000 jobs in recent weeks.
Elon Musk’s SpaceX is trying to arrange a sale of mostly employee stock that would value the company at $150bn. The offering at a 20 per cent increase to its previous valuation would help employees and shareholders make strong returns...
https://todayuknews.com/market/sili...ffload-start-up-shares-as-valuations-plummet/
todayuknews 3 hours ago
Silicon Valley staff rush to offload start-up shares as valuations plummet
Silicon Valley workers are rushing to offload stakes in tech start-ups through private share sales after a wave of job cuts, compounding a collapse in valuations.
Employees of embattled tech groups are flooding secondary markets — where stakeholders in a private company sell shares to third parties — as the industry’s former darlings such as Klarna and Stripe have been forced into aggressive cost-cutting measures, according to brokers and investors.
For many workers who have lost their jobs, their shares vest within 60 days, forcing them to sell during the worst downturn in a decade. Some companies are offering an extension on this timeframe, according to brokers, although some sellers want to get out of their holdings over fears the market rout will get worse next year.
“We are seeing an inflow of people being laid off trying to sell their shares,” said Greg Martin, managing director of Rainmaker Securities, which facilitates private securities transactions. “These companies have built their headcounts up so much, so there are a lot of people highly motivated to get a sale done.”
Martin added: “In general, we are seeing a 30 to 80 per cent decline in price from a year ago.”
The uptick in sellers is pushing down the price of many tech start-ups, adding to concerns of an industry-wide reset in valuations of fledgling companies as rising interest rates and faltering public technology stocks filter through to private markets.
The rout means it has become increasingly hard to assess a current price for many start-ups. Most have avoided raising money from venture capitalists this year out of fear that they would be forced to accept a lower valuation, leaving few solid indicators of how the wider slump has affected them.
Meanwhile, the informal private secondary markets handled by dealers such as Rainmaker are often highly illiquid, further complicating attempts to come up with an accurate “market” value.
The head of one tech venture capital fund in Silicon Valley said he had received 10 times more offers to invest in companies through secondary share sales this month than usual.
Multibillion-dollar businesses such as fintechs Klarna, Chime and Stripe, ecommerce group Instacart and autonomous delivery group Nuro, have cut 10 to 30 per cent of their staff in the past two months. They have mirrored moves by public tech giants: Facebook parent Meta and Amazon have both announced plans to cut more than 10,000 jobs in recent weeks.
Elon Musk’s SpaceX is trying to arrange a sale of mostly employee stock that would value the company at $150bn. The offering at a 20 per cent increase to its previous valuation would help employees and shareholders make strong returns...