Shulou(Shulou.com)11/24 Report--

Beijing time on December 30 morning news, According to reports, After a round of layoffs, And start-up valuations have shrunk sharply, Silicon Valley "Workers" Through the private market to sell technology start-up stocks.

As erstwhile industry darlings such as Klarna and Stripe are forced to take aggressive cost-cutting measures, tech employees are flooding into the secondary market, a channel through which private-sector employees can sell their shares to third parties, brokers and investors say.

Many employees who lost their jobs had to cash in their stock holdings within 60 days, forcing them to sell shares amid the worst economic downturn in nearly a decade. Brokerage firms say some allow employees to delay selling shares, but some sellers want to sell quickly for fear that the market will deteriorate further next year.

"We're seeing a huge influx of laid-off employees coming in and selling stocks. Greg Martin, general manager of Rainmaker Securities, a private stock exchange, said,"These companies have huge numbers of employees, so many people are very motivated to liquidate their stocks. "

Martin added: "Overall, we're seeing a 30 to 80 percent drop in share prices from a year ago. "

The increase in sellers is putting downward pressure on stocks of many tech startups. As US interest rates rise and weakness in public tech stocks seeps into private markets, there is growing concern that start-up valuations across the sector will be restructured.

The plunge means it is increasingly difficult to assess the current valuations of many startups. Many startups avoid raising money through venture capitalists this year for fear of being forced to lower valuations, making it difficult to assess the impact of the macro environment on them with hard data.

At the same time, informal private secondary markets set up by companies such as Rainmaker tend to be illiquid, complicating accurate assessment of their "market capitalisation."

The head of a Silicon Valley tech venture capital fund says he has received 10 times as many offers this month to invest in companies through secondary stock sales as he normally would.

FinTech companies Klarna, Chime and Stripe, as well as multibillion-dollar startups such as e-commerce company Instacart and automated delivery company Nuro, have all laid off 10% to 30% of their workforce in recent months. Their move echoes that of publicly traded tech giants: Facebook parent Meta and Amazon have both announced more than 10,000 job cuts in recent weeks.

Anduril, an AI defense company, has been invested by Peter Thiel's Founders Fund and Andreessen Horowitz Fund at a valuation of $8.5 billion. But Rainmaker's data show the company's November secondary market price of $16.95 a share, down nearly half from $31.50 in March.

Softbank-backed Chime received a valuation of $25 billion in August 2021 in its latest round of external funding, but since then the company's valuation in the secondary market has fallen by a quarter and its current share price is $60 a share.

"The number of sellers has increased significantly and the number of buyers has decreased significantly, which has caused prices to fall more in line with open market valuations. Martin of Rainmaker said.

However, private-market equity trading shows that after the 2021 venture capital funding boom drove valuations sharply higher, many private-sector stocks, while falling significantly, remained at or even improved from pre-epidemic prices.

The head of a venture capital fund says valuations of companies he invests in have plummeted, but only relative to historical highs. "Valuations are really miserable, but they're crazy when they go up. Yes, the stock price was terrible. It had been much higher before, but against the background of the past few years, it was not too bad. 'he said.

The u.s. IPO market has shrunk to its lowest level in 20 years, forcing some tech companies to create structured liquidity plans that allow employees to sell large amounts of stock. But at the same time, the company's own valuation tends to shrink dramatically.

Kevin Swan, private markets specialist for Morgan Stanley's Workplace Financial Solutions business, said companies preparing to go public this year were "scrambling to find access to loans or sell shares in the secondary market."

Swan adds that start-up employees and investors had hoped to cash in on blockbuster IPOs this year, but the lack of an IPO forced them to act.

In addition, some tech employees are increasingly worried that their options will become "dive options" and that they won't be able to go public anytime soon, says Glen Kernick, head of Silicon Valley at startup valuation service Kroll. A "dive option" refers to an option whose strike price is higher than the market price, making the option meaningless.

"Buyer demand increases when a company is about to IPO or when it is about to raise capital... but both are ruled out. "Konik said. Because of the impact these problems can have on company share prices, some companies are even restricting current employees from selling shares on the secondary market, he added.

Privately held companies such as Klarna, Stripe and Checkout.com in Europe, as well as Instacart, have lowered their internal valuations. By lowering the stock price, employees will receive higher returns in the event of a future IPO. While layoffs in the tech industry are spreading, competition for top engineers remains fierce.

Elon Musk's SpaceX is trying to orchestrate a round of employee-owned stock sales that would be valued at $150 billion. The valuation is up 20 per cent from the previous round and helps generate strong returns for employees and shareholders.

The value of a company's common stock is determined by trading volume, investor pricing of preferred stock, and the company's own internal valuation. Internal valuations are usually determined by the board of directors and independent consultants during the "409a" assessment process for tax purposes.

How to create liquidity for employees while maintaining sky-high valuations? This is a problem that businesses "must solve in the next 12 months." Almost every company is thinking about it,"says ravi Viswanathan, founder of california-based venture capital fund." "

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