Listing on a formalised private market comes with significant advantages for both the investor and the issuing company, not least when you’re looking at valuations.

In addition to having a structured market deliver a weight of credibility, it also enables investors to place a far higher degree of confidence on the valuation of an asset. Whether that’s a fund manager wanting to provide frequent updates to clients or an individual looking to understand net worth and potentially manage tax positions, a true secondary market accompanied by strong disclosure and reporting requirements acts as a genuine catalyst to change investor behaviour.

And without a private listing, investors face a real challenge when it comes to applying a valuation. Some may rely on the last funding round and that’s less of an issue if the company is continually going back to investors seeking fresh capital as the market is revaluing the proposition on a regular basis. But profitable, growing businesses look different and to account for that a range of metrics can be applied to adjust a valuation over time based on the performance of sector peers. But ultimately an active market and a live price will always give by far the most accurate valuation.

It’s worth noting that not all secondary market trading is considered ‘good’. If the price appears artificially supported, the valuation is disconnected from the wider fundamentals or liquidity is so thin as to raise questions over efficient price discovery then the listing is little more than a tick box exercise and will be marked down accordingly.

However, a robust company trading in an equally robust and well governed private market environment is far better positioned. Institutional investors will be willing to deploy capital in greater quantities, that important price discovery point is addressed, the real world demand for the stock will emerge, investors gain confidence and there’s a genuine path to exit laid out.

Secondary trading facilities can deliver a material impact, but business owners need to be mindful that despite the private market designation, there’s no room to hide. The accompanying transparency is after all what will give the heavyweight investors the confidence to back your business and further bolster your valuation.

Mike McCudden, CEO, JP Jenkins

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