An upending of a key valuation principle? 

January 28, 2025

A telling chart to think about and an offer

A report from Forge Global that private market returns outpaced public market indices should not be ignored.

Can we really still believe that private companies are fundamentally less valuable than quoted ones when you see this chart?

A graph of a chart Description automatically generated with medium confidence
The Public Mag 7 is the public Magnificent Seven including the Amazon, Apple et al.

Of course Forge Global runs secondary markets, so being able to produce this type of chart is catnip. It reinforces the value that its business can offer the market. And the biggest and best private companies, including the AI unicorns, won’t be representative of the whole market, so spot data like this needs to be treated with caution.

We have written before about the challenges of finding quoted comparables. Alternative markets such as Forge Global, Asset Match and the soon to emerge PISCES will plug a few gaps.

Globally we need to rebuild stock markets, even if they need to adapt for 21st century behaviours. They are a crucial element of an efficient market economy.

Back to valuations though. Finding the right underlying principles, so that a valuation is convincing to all, really matters. There has been a long-held belief that there should be a discount for equity shareholdings that are not listed on a stock market.

I have come to agree that view that the closing price of a listed stock is simply a combination of 10,000s of uninfluential minority trades, so intrinsically the multiple based on the closing price should NOT be discounted when applied as the comparable for a private company valuation.

This data from Forge Global adds another force. Maybe we should actually apply a premium to the closing price?

I am off to find someone who wants to help us with the academic theses that need to be formed around this issue.

In the meantime, I have asked the Athla Valuations team to be very careful indeed when using quoted comparables in private company valuations.

Growing demand for your and our services

This is a fun chart.

It is sourced from an advanced search on Companies House showing how many companies created in each of the recent decades are still alive in early 2025.

Why I bring it to your attention is because these volumes are going to mean 100,000s more mandates from shareholders and companies for services around shares and companies.

The new IHT rules will bring forward a significant proportion of these mandates, and much more attention is going to need to be paid to value as it will be a critical factor in helping clients to understand in which direction to travel. Taking soundings from the lawyers I have seen face-to-face recently, and based on our own activity levels, the pre-wave took place in autumn last year, and a minor crescendo will start to grow between now and April 2026.  When a Tsunami might hit, I am not sure, but I think we do need to plan.

To that end, would you like us to prepare some materials or hold a webinar for your colleagues or even your clients on the issues to think about when it comes to valuing companies, shares and assets?

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