Helping your company transition from equity crowdfunding to the public markets.
StartEngine Secondary has struggled to find its place in the startup ecosystem. It costs money but is stuck in limbo from a product-market-fit perspective. Startups with capital to IPO would rather IPO and those that don't would rather not spend money listing on the exchange.
There have been a number of successful equity crowdfunding companies IPO's over the past 24 months or so. Many of them, thus far, have a very similar trajectory: A strong first day followed by large sell-offs once the shareholder's shares begin hitting the exchange.
This might have something to do with the companies themselves, not some underlying issue with the process. But it's a clearly concerning trend regardless.
For example, Knightscope is a cool tech company that IPO'd at the peak of the market. While the company is innovative and futuristic, it has been bleeding money from the start. A poorly timed IPO with underlying fundamentals generally spells disaster. Atlis Motors was even worse. While Knightscope performed incredibly poorly, the company has several products, millions in revenue and strong growth. Atlis Motor Vehicles has been developing their product for years, and still very little to show for it.
I am personally the most optimistic in regards to the Monogram Orthopedics IPO. The company has growing, profitable revenue and an exciting pipeline with several events that could result in massive stock and spikes.
Regardless of all of that, many have expressed a concerning trend expressed among founders and investors alike: Poor IPO performance. Raising all of this money on the private markets only to fail on Day 1 isn't great optics.
I've talked with some founders about their opinions on the matter, and many don't see any utility in listing through the platform. Many insiders often cash out by selling stockholders through a Reg A (despite that typically going poorly for the company). And the stockholders themselves are generally expected, industry-wide, to hold until the company conducts an IPO.
Mitigating the Effects of Poor IPO Performance
One way to mitigate these effects could be utilizing secondary markets, like StartEngine Secondary, to relieve some of the 'sell' pressure going into an IPO. There are a number of investors sitting on substantial gains going into most IPOs. Odds are, at least a couple of them are going to sell, and that's enough to kill momentum in an IPO. This might cause fear among others who begin taking profits, and this can create a snowball effect that's difficult to come back from. This can likely be mitigated by strong underlying fundamentals going into an IPO.
Listing on a secondary market is clearly only good for certain companies, though. Quite a few companies have actually listed on StartEngine Secondary. But many of them saw very little volume as there are no market makers involved, so it's simply facilitating exchanges. This means it's really best for many of these companies with thousands of shareholders that already might be looking towards an IPO. There will be both buyers and sellers with decent volume all around. Shareholders can offload some or all of their shares, and this could result in less selling pressure on IPO day.