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Private markets and pre-IPO investing · lesson 1 of 20

Public markets and private markets

In a public market a company's shares are listed on a stock exchange. Anyone can buy or sell them every day, the price is visible to all and the company must publish financial statements and periodic information under precise rules.

In a private market the shares are not listed. They change hands through direct negotiation between seller and buyer, often with the company's approval. There is no continuously updated price: the usual reference is the latest funding round.

Three practical consequences follow from this difference. Less information is available, selling takes time and is not always possible, and access is generally reserved for qualified or professional investors.

Questions

1. What is the most common price reference for the shares of a private company?

The price of the latest funding round

Without an exchange there is no continuous price: the starting point is the price of the latest round.

2. Which obligation distinguishes a listed company from a private one?

Publishing financial statements and periodic information

Listing brings public disclosure obligations that a private company does not have.

3. Why is selling shares of a private company harder?

Because there is no continuous market and the company's approval is often needed

A sale is possible but requires a counterparty, time and often the company's consent.

Next lesson: What a unicorn company is

Continue from lesson 4

Private markets and pre-IPO investing: an online course in 20 short lessons with quizzes and a final certificate, on Unicorn Academy.

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