Valuing a private company is like looking at a mosaic. Stare too closely at a single tile and you may miss the bigger picture.
That's why I enjoyed the analysis that Cory Weinberg at The Information published yesterday on how mutual funds are valuing their private holdings.
The analysis:
- 1940 Act Funds (i.e. mutual funds) are required by regulators to periodically report the value of their portfolio holdings.
- Increasingly, '40 Act funds have been investing in private tech companies.
- This requires '40 Act funds that own private stock to publicly disclose an estimate of their holding value, usually updated quarterly.
- These reports are publicly available, but painful to get individually.
** Thankfully, we've aggregated 1,000s of these data points on our platform.**
- Using Caplight Data, Cory looked at how funds from Fidelity Investments, BlackRock, and T. Rowe Price are valuing their shares in private companies like Fanatics, Stripe, and Databricks.
The conclusion:
Many large private tech companies have had consistent mutual fund valuation markups recently, indicating stable-to-improving underlying fundamentals. A notable exception has been e-commerce-focused companies.
I recommend reading the full article, linked in the comments below.
My takeaways:
1. Cory's analysis is consistent with other secondary market data we track; prices have improved steadily since June '23 for most late-stage pre-IPO companies.
2. Mutual fund marks are just 1 piece of the mosaic, but they can be valuable indicators of private company value in the absence of a recent funding round or closed secondary market trades.
3. You can access the same private market data the pros use. If you're interested, dm me or email me at javier@caplight.com.
DISCLAIMER: "This is for informational purposes only and does not constitute an offer to buy or sell securities. Any investment in private funds is speculative, carries risk, and is suitable only for those who can bear the loss of their entire investment. Private funds investments are illiquid, and shares will not be redeemable at investor's discretion. Investors should fully understand and be able to assume the risks associated with investing in private funds."
