Understand How to Invest in Pre-IPO Deals and its Pricing Like a Pro

In our first article, we discussed the basics of pre-IPO investments and how private equity platforms like Jarsy, EquityZen, Forge Global, Augment, Linqto, and FundersClub are making these opportunities more accessible. In this follow-up, we delve into the complexities of pre-IPO pricing and how Jarsy addresses these challenges to make informed investing easier for everyone.

How to Determine the Price of a Pre-IPO Share

Without a centralized pricing source, determining the value of pre-IPO shares can be complex. Investors must consider both quantitative and qualitative factors. For larger or heavily traded names, there tends to be more market consensus on secondary pricing, but this is not always the case for smaller or less-known companies.

One critical aspect of pre-IPO investing is understanding the implied valuation relative to the most recent funding round. Private equity platforms typically display sell orders and provide the discount/premium gap. However, investors need their own insights from both quantitative and qualitative analyses to assess the value accurately, and consider if the the private equity sale is a great deal or not.

Quantitative Factors

Quantitative factors are the hard numbers that inform the pricing of a company's shares. Key quantitative factors include:

• Last Funding Round's Price: The price at which the company last raised private capital.

• Secondary Transaction History: Historical data on where shares have traded.

• Company Financials: Publicly disclosed financials and relevant competitor metrics.

Qualitative Factors

Qualitative factors include positive and negative business developments such as:

• Company News: Developments like new product launches or layoffs.

• Regulatory Environment: Changes in regulations affecting the company.

How Jarsy Helps Investors

Investors need to identify what drives any discount or premium. Jarsy lists all available OTC prices as guidance. Liquidity issues also play a significant role; Jarsy aims to make the market more liquid and help reduce the premium/discount gap for users. Jarsy solves the liquidity issue by:

• Lower Minimum Investments: By allowing investments starting as low as $10, Jarsy makes pre-IPO shares accessible to everyone.

• Fractional Share Purchases: Investors can purchase fractional shares, allowing them to diversify their portfolios and decrease risk.

• Blockchain Verification: Ownership is verifiable outside of the platform through blockchain and token technology, ensuring transparency and security.

• Ease of Trading: Shares are easily tradable in the future, improving liquidity.

• User-Friendly Process: The entire investment process is software-driven, eliminating the need to communicate with specialists and making it as easy as possible for users.

Disclaimer

Investing in pre-IPO shares involves significant risks, including loss of principal. It is important to conduct thorough research and consider your financial situation before making any investment decisions.