If you can get an allocation

The narrative is deceptive that “private markets are new public markets.”

There are some similarities, a conceptual overlap or two, even some truths, though also misconceptions…

… best captured with incisiveness and humor by Matt Levine, as always.

But all the parallels and contrasts are there in the same sense as, say, between a car and grapefruit, if both are very, very far off in the distance, maybe one more than the other.

Two aspects in particular keep the referenced financial worlds indelibly apart, and from close up unsuited for comparison:

1. The private market can’t be shorted, so value is not consensus value but consensus for longs only…

2. Private investors purchase shares with liquidation preference, which favors the most recent funding class, often above all others.

On one hand, private rounds are thus inherently optimistic, while on the other hand inordinately cautious… an idiosyncrasy related to a third standout element that may be cause or possibly effect of private market illiquidity…

3. Acknowledged informational asymmetry.

With these defining aspects back of mind, the semblance is not between the mega private round and IPO, but between the private funding and another private type, which doesn’t see much mention in the write-ups:

Bridge finance

It’s always just a question of what to what… when to when… why to why…

Though, to be fair, “new public markets” is much more resonant, and promises the cleaner upside, if you can get an allocation.