From Private Placements to Scalable Markets

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Private companies are staying private for longer, yet founders, employees and early investors still need opportunities to realise value. At the same time, wholesale and sophisticated investors are seeking access to high growth businesses before a potential IPO. These forces are transforming pre IPO share trading from a fragmented, relationship driven process into a more organised and scalable market. In this episode of Unlocking Liquidity, we explore how private share marketplaces are evolving, why controlled secondary liquidity is becoming part of long term capital planning, and what investors should consider when assessing pre IPO opportunities. We also examine the Australian market and the role platforms such as PrimaryMarkets can play in connecting private companies, shareholders and eligible investors. The pre IPO market is entering a new era, but greater access also makes valuation, structure and due diligence more important than ever.

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For decades, investing in a private company before its initial public offering was largely the preserve of venture capital funds, private equity firms, founders and a relatively small group of institutional investors. Transactions were relationship driven, information was fragmented and shareholders seeking liquidity often had few practical options beyond waiting for an acquisition or IPO. That structure is beginning to change. The global market for pre IPO shares is moving from a collection of bespoke transactions towards a more organised and scalable financial market. Specialist marketplaces, private banks, investment platforms and institutional trading desks are increasing their involvement, while some of the world's most valuable technology companies remain private for substantially longer than earlier generations of businesses. PitchBook recently described a market for coveted pre IPO shares estimated at approximately US 120 billion dollars, with banks and private market platforms competing to provide investors with access. The figure reflects more than growing interest in a handful of prominent companies. It points to a broader transformation in the way private company shares are issued, valued and traded. Pre IPO trading is no longer simply an informal process through which an early employee finds a buyer for shares. It is developing into a more structured component of the global capital markets.

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The rise of the pre IPO market begins with a fundamental change in the corporate lifecycle. Historically, successful growth companies often listed on a public exchange relatively early in their development. An IPO gave the company access to capital, provided liquidity for existing shareholders and created a publicly observable valuation. Public investors were consequently able to participate in a significant portion of the company's growth. Today, many high profile businesses are able to access large pools of private capital without going public. Venture funds, sovereign wealth funds, private equity firms, family offices, strategic investors and institutional asset managers can provide hundreds of millions or even billions of dollars through private funding rounds. Companies may therefore remain private while reaching valuations and operating scale once associated almost exclusively with listed corporations. This shift offers companies greater control over the timing of a potential IPO. Management can avoid some of the costs, disclosure obligations and short term market pressures associated with public ownership. Founders and early investors may also retain greater influence over strategy and governance. However, a longer private lifecycle creates a corresponding liquidity challenge. Employees may hold valuable equity but have limited opportunities to realise it. Early investors may want to return capital to their own investors. Founders may wish to diversify part of their wealth, while new investors may want access to the company before a potential listing. The private secondary market has grown in response to these competing needs.

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A pre IPO transaction generally involves securities in a privately owned company that may be approaching a future listing, acquisition or other liquidity event. The transaction can occur through a primary capital raising, where new shares are issued and the company receives the proceeds, or through a secondary sale, where an existing shareholder sells shares to another investor. The distinction is important. Primary capital funds the company's operations and growth. A secondary transaction provides liquidity to an existing shareholder but does not ordinarily place new money on the company's balance sheet. In practice, the two can be combined. A company undertaking a major capital raising may allow employees or early investors to sell a portion of their holdings at the same time. This can introduce new institutional investors, provide controlled liquidity and establish a reference valuation without requiring the company to list publicly. As the number and value of these transactions increase, pre IPO shares begin to display some of the characteristics of a distinct market. Investors seek information about available parcels, recent transaction prices and company valuations. Buyers compare opportunities, shareholders monitor demand and intermediaries develop systems for managing documentation, eligibility, settlement and company approvals. Unlike a public exchange, however, a private market does not normally provide continuous trading or a single observable market price. Each transaction may be affected by the class of shares being sold, shareholder rights, transfer restrictions, company approval requirements and the amount of information available to investors. The market may be scaling, but it remains fundamentally different from public equities.

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A relatively small group of globally recognised companies has attracted considerable attention to pre IPO investing. Businesses such as SpaceX, OpenAI, Anthropic, Stripe, Databricks, Canva and other private technology leaders have achieved valuations large enough to place them alongside major listed companies. Interest in these businesses is driven partly by their growth prospects and partly by scarcity. Investors who were once able to wait for successful technology companies to list may now find that a substantial amount of value creation has occurred while the company was privately owned. This has encouraged private banks, wealth managers and investment platforms to develop ways for eligible clients to obtain exposure before an IPO. The resulting market is not limited to direct purchases of company shares. Exposure may be offered through special purpose vehicles, managed funds, nominee structures or other investment entities that hold the underlying securities. These structures can allow smaller parcels to be aggregated, but they also introduce additional considerations, including fees, governance rights, structural complexity and the relationship between the investor and the underlying company. Demand can also create pricing distortions. A famous company name may attract buyers even where financial information is limited or the implied valuation has risen significantly. Investors may be offered shares at a premium to a recent funding round, particularly when supply is scarce. The expansion of access therefore increases the importance of understanding precisely what is being acquired.

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Australia has its own population of large and successful private companies, led by businesses such as Canva, Airwallex and Culture Amp. Their growth has increased local investor interest in private technology companies and demonstrated that Australian founded businesses can achieve global scale without immediately listing on the Australian Securities Exchange. Canva is the most prominent example. The company has periodically facilitated employee share sales through controlled secondary transactions. These programs have allowed eligible shareholders to realise part of their holdings while providing selected investors with exposure to the company. They have also established valuation reference points without requiring Canva to undertake an IPO. Such transactions demonstrate how secondary liquidity can become part of a private company's capital management strategy. Rather than allowing unrestricted trading, a company can determine when liquidity is available, which shareholders may participate, how much stock can be sold and which investors are permitted to acquire it. Australia's market is smaller than that of the United States, but many of the same forces are present. Companies are staying private for longer, investors are seeking access to unlisted growth opportunities and existing shareholders increasingly expect that some form of liquidity may become available before an IPO or trade sale. Australian superannuation funds, venture capital firms, family offices and sophisticated private investors are also becoming more experienced in assessing private market opportunities. At the same time, specialist platforms are providing more structured ways for companies to conduct capital raisings and facilitate secondary transactions. The development of this infrastructure is important because scalable private markets require more than investor demand. They need orderly transaction processes, appropriate investor qualification, reliable documentation and mechanisms through which companies can retain control over their share registers.

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Private companies have traditionally treated liquidity as an eventual outcome. Shareholders invested with the expectation that an IPO, acquisition or company buyback might provide an exit at some point in the future. That assumption is being reconsidered. As companies remain private for ten years or more, asking employees and early shareholders to wait indefinitely can become impractical. Equity incentives may lose some of their value if employees cannot translate them into financial outcomes. Early investors may need distributions, and founders may reasonably seek to diversify a portion of their personal holdings. A planned secondary program can address these pressures without forcing the company into a premature IPO. This is liquidity by design, the deliberate creation of a controlled environment in which eligible buyers and sellers can transact under conditions determined by the company. A company sponsored trading hub can provide defined trading windows rather than continuous trading. It can restrict access to eligible investors, allow the company to review proposed transfers and make relevant information available within a structured environment. It may also reduce the administrative burden created by unsolicited approaches to shareholders. For companies, the objective is not necessarily to reproduce the liquidity of a public exchange. It is to provide an appropriate level of liquidity for the company's stage, ownership structure and strategic objectives. This approach can help companies remain private on their own terms while recognising that long term shareholders may have different financial needs.

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One of the most significant differences between listed and unlisted securities is price discovery. A listed share has a visible market price generated by continuous interaction between buyers and sellers. A private company may have several different valuation reference points, including its most recent capital raising, an employee secondary sale, an independent valuation, an internal option valuation or a price negotiated in an isolated transaction. Those values are not necessarily interchangeable. A primary funding round may involve preference shares with liquidation rights, anti dilution protections or other benefits that do not attach to ordinary shares sold by an employee. A small secondary parcel may trade at a discount because the buyer receives limited information or no governance rights. Alternatively, scarcity and high investor demand may result in a secondary price above the company's most recent institutional valuation. The headline valuation of a private company can therefore conceal substantial differences between securities. As the pre IPO market scales, better price discovery will be one of its most important developments. A greater number of genuine transactions can provide investors and companies with more relevant evidence of demand. However, transaction data must be interpreted in the context of share class, rights, restrictions, transaction size and timing. A price is meaningful only when investors understand what it represents.

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Technology can make it easier to identify and execute private share transactions, but it cannot transform an inherently illiquid security into the equivalent of a listed share. A pre IPO investor may need to hold the investment for an extended period. There may be no guarantee that another buyer will be available when the investor wants to sell. The company may postpone its IPO, complete a new funding round at a lower valuation or never achieve a liquidity event. Transfers may also be subject to board approval, rights of first refusal, pre emptive rights, shareholder agreements and other restrictions. In some cases, an investor holds an interest in a special purpose vehicle rather than shares in the company itself, adding another layer between the investor and the underlying asset. The term pre IPO can itself create a misleading sense of proximity. It may suggest that a public listing is planned or imminent when no firm timetable exists. Companies can remain described as pre IPO for years, and market conditions can cause listing plans to change rapidly. For these reasons, investors should assess a pre IPO opportunity as a private investment, not as a short term public market trade awaiting a known listing date.

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The scaling of pre IPO markets makes institutional quality due diligence increasingly important. Investors need to examine the company's revenue, growth rate, cash position, capital requirements, competitive advantages and governance. They should understand how the proposed price compares with previous funding rounds and recent secondary transactions. The capital structure also requires close attention. Different share classes may carry different economic and voting rights. Options, warrants, convertible notes and other instruments can affect the fully diluted ownership position. Investors should consider whether future capital raisings may dilute their holdings and whether the company is likely to require substantial additional funding before reaching an exit. The identity of the seller can also be relevant. An employee seeking to purchase a home may have a different motivation from an institutional investor selling a large position. A transaction involving numerous senior executives selling substantial proportions of their holdings may justify further enquiry, although it does not necessarily indicate a negative view of the company. Investors should also examine the transaction structure, fees and legal ownership of the securities. Where an investment is made through a fund or special purpose vehicle, the terms governing that entity can be as important as the prospects of the underlying company. More accessible does not mean less complex.

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For Australian private companies, the growth of secondary markets creates an opportunity to think more strategically about shareholder liquidity. PrimaryMarkets provides infrastructure through which unlisted companies can raise capital and facilitate trading in their shares among eligible wholesale and sophisticated investors. A company trading hub can create a controlled marketplace that connects approved buyers and sellers while allowing the company to maintain oversight of its ownership environment. This can support companies at different stages of development. A growth business may use a hub to provide periodic employee liquidity. A mature private company may want to enable early investors to exit over time. Another company may combine a primary capital raising with secondary share availability, allowing new investors to support both the company and its existing shareholder base. For investors, a structured platform can provide access to opportunities that may otherwise circulate through closed personal or institutional networks. It can also provide a defined process for reviewing available information, expressing interest and completing a transaction. The role of the platform is not to remove the risks associated with unlisted securities. Those risks remain significant. Rather, it is to bring greater structure, connectivity and efficiency to a market that has historically been highly fragmented.

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The growth of pre IPO share trading represents part of a wider convergence between public and private markets. Private companies are reaching public company scale. Institutional asset managers are developing dedicated private market strategies. Wealth platforms are expanding access, and companies are becoming more deliberate about providing liquidity before an exit. This does not mean private markets will simply become public markets operating behind closed doors. Transfer restrictions, limited disclosure, negotiated pricing and lower liquidity will remain defining characteristics. What is changing is the infrastructure surrounding those characteristics. The next stage of private market development will be shaped by platforms capable of bringing together investor qualification, company approved access, information, transaction management and settlement. It will also depend on companies recognising that shareholder liquidity can be managed as part of their long term capital strategy rather than deferred until an eventual IPO. The US 120 billion dollar market identified by PitchBook may be an important milestone, but the larger development is structural. Pre IPO shares are moving from occasional, relationship based transactions into a more organised market with its own participants, pricing signals and investment strategies. For wholesale and sophisticated investors, this may create greater access to companies previously available only through venture capital funds and institutional networks. It also creates a corresponding responsibility to assess valuation, structure and liquidity with the discipline normally applied to other private investments. The pre IPO market is scaling. The opportunity now is to ensure that the infrastructure, transparency and investor understanding surrounding it scale as well. This article is general information only and does not constitute financial, legal or investment advice. Investments in private companies are speculative, illiquid and involve a risk of loss. Prospective investors should conduct their own due diligence and obtain independent professional advice before making an investment decision.

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And that brings us to the end of this episode of Unlocking Liquidity. Thanks for spending your time with us, we hope today's conversation gave you a fresh perspective on private markets and how liquidity is evolving. If you enjoyed the episode, please follow or subscribe wherever you listen, and feel free to share it with someone who'd get value from it. For more insights, opportunities and episodes, visit PrimaryMarkets.com. Until next time, thanks for listening, and we'll see you in the next conversation.