Private Growth Equity Outperforms Public Markets Again In Q2 2018
October 8, 2018 | Blog

Private Growth Equity Outperforms Public Markets Again In Q2 2018

SharesPost Private Growth Index Reports best Q/Q growth since 2H:2015

In second quarter of 2018, the SharesPost Private Growth Index, which tracks valuations for 106 private growth firms, increased 13.7 percent to 145.56 from 128.04 from the previous quarter. By comparison, the S&P 500 was moderately up 2.9 percent whereas the Dow Jones U.S. Technology Index increased 6 percent during the same period.

Since its launch on Jan 1st, 2017, the SharesPost Index has increased 45.5 percent through June 30, 2018. By comparison, S&P 500 has increased 21.42 percent whereas the Dow Jones U.S. Technology Index has increased 48.55 percent during the same period.

Preliminary Q3 data through Aug 31, 2018 suggests the SharesPost index continues to outperform benchmark indices as the bull market has started to show signs of stalling recently. The Q3 2018 Index is due out in early October.

The cumulative implied valuation of the 106 private growth companies included in the Index has increased from $317 billion as of previous quarter to $353 billion at the end of second quarter of 2018. The median implied valuation of the 106 companies included in the Index has increased slightly to $1.23 billion at the end of second quarter from $1.10 billion at the beginning of this year.

SharesPost Private Growth Index recorded best Q/Q growth since 2H:2015

Since the first quarter of 2017, the Private Tech Growth index steadily grew at roughly 5 percent. Private asset growth has been slower compared to the public indexes during 2016 and 2017. But, we see the trend change as witnessed by the IPO and M&A activity in 1H:2018. It’s been a fairly busy few months for investors in the Private Tech Growth asset class. We think this is a sign of things to continue in later half of 2018. At the same time, we believe mega consumer Internet unicorns such as Airbnb and Uber will likely wait until 2019. We believe the recent spurt of IPOs in 2018 and the favorable response by public investors bodes well for private tech.



Q2:2018 SharesPost Private Growth Index Performance Drivers

The key events affecting the Index performance during the second quarter of 2018 were:

(+) Upside drivers: Primary funding rounds during this period included Dataminr (Series E), Lyft (Series I), OpenDoor (Series E and E1), Tanium (Series G), CrowdStrike (Series E and E-1) and Robinhood (Series D). On average, the valuation of the companies that completed a primary funding round during Q2:2018 increased by 194 percent. We did not track any notable acquisitions of companies included in our 2018 Index. There were four Initial Public Offerings (IPOs) during Q2:2018 of companies tracked in our 2018 Index of which three were successful exits had namely Docusign, Avalara and Zuora.

(-) Downside drivers: We did not track any notable down round funding’s during Q2:2018. However, we observed modest downward valuation trends for companies including Fuze. Domo had a down-round IPO in the second quarter. Also, mutual funds modestly downgraded the valuations of mega-cap private growth companies such as Pinterest and Palantir.

Preliminary Q3:2018 trends indicate continued outperformance of the SP Index

As of Aug 31, 2018, our preliminary data indicates that the Index has increased 27.03 percent compared to 8.52 percent increase in the S&P 500 and a 20.824 percent increase in the Dow Jones U.S. Technology Index for YTD 2018. Key contributors to performance include companies that completed primary funding rounds i.e. DoorDash (Series E), One Medical Group (Series I), Slack (Series H and H-1), OfferUp (Series D). There was one successful IPO exit for Bloom Energy and two notable acquisitions of companies Github for 7.5B and Appnexus for approx. 2B respectively will result in positive trend for Q3 SP Index. Amongst the index companies, there have been a total of 9 exits till Aug 31, 2018 either via an IPO or M&A, averaging at about 1 per month.

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CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.

Alejandro Ortiz

Alejandro Ortiz

Alejandro is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Valuation Analyst at Duff & Phelps with a focus on TMT industries.
PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.