How has the tariff-induced public market sell-off impacted your private company portfolio?

😵 Close your eyes if you're in the "private market prices only go up" crowd.

If you're a markets junky like me, you've probably had a hard time looking away from your news feed over the past week. And, notwithstanding today's rebound, there will be long-term impact on risk assets.

But keep in mind, it's going to be a while before public market volatility is fully translated into valuations of private companies like SpaceX, OpenAI, Anduril Industries.

False statement: private market prices only go up.

True statements: pre-IPO company prices go up and down. They are correlated with public market price movements, but often with a 3-6 month lag.

I've noticed a repeated pattern over the past several public market corrections. This one is likely no different:

🛑 Pre-IPO stock prices typically don't correct immediately. Instead, the first thing that usually happens is new buy interest stops coming in.

❌ Around the same time, existing buy interest may often be canceled, and sometimes trades already in process are paused.

🥶 Seller price expectations can take weeks to months to adjust to investors' new risk tolerance. The question "what do tariffs have to do with my [insert innovative tech company] stock?" will be asked a lot.

🤝 Sellers will eventually capitulate. New trades will be agreed to. Prices reset.

This price discovery process took 3 months during the last major correction of risk assets in 2022.

Leading indicator?

At Caplight, one indicator we use to estimate where prices are going is the Bid as a % of Total Interest ratio, which measures the amount of new buy interest versus total interest in the market.

In periods where this ratio is below 30% for weeks, and public prices are volatile, we usually see private company valuations decline meaningfully.

As of yesterday, our Bid / Total Interest ratio is at 40%.

*But* that's down from 55% when markets were at all-time highs in February, so private market interest has been declining already for 1mo+.

What do you think? Will private market valuations drop in lockstep with the public market over time?

Want real-time insights like this? Reach out at contact@caplight.com.

*This does not constitute an offer to buy or sell any securities. Please consult with your own counsel or financial advisor before investing in private company stock.