Forge Stock: A Secondary Market for Startups

Another day, another reason to avoid special purpose acquisition companies (SPACs). This time it’s the Reddit “day traders” wreaking havoc on companies like Spire Global. An increase in stock price volatility equals an increase in risk. Or at least that’s what they teach you in Finance 101. Therefore it’s critically important to only invest in companies you want to own for a very long time. That way, when SPIRE dumps -40% in one trading session for no good reason, you can back up the truck. But SPACs don’t give us enough information to decide if a company is worth holding for the long run, so volatile SPACs do nobody any good.

We talk a lot of smack about SPACs, so why have we written about 64 of them now? It’s so we can do cool stuff like this:

SPACStock PriceReturn
Metromile (MILE)$3.51-65%
Talkspace (TALK)$3.80-62%
View (VIEW)$5.33-47%
Innoviz (INVZ)$5.48-45%
Velodyne (VLDR)$5.68-43%

Above are the five worst-performing SPACs in our universe. And below are the five best-performing SPACs.

SPACStock PriceReturn
Blink Charging (BLNK)$26.31+163%
QuantumScape (QS)$22.57+126%
Virgin Galactic (SPCE)$22.23+122%
Stem (STEM)$21.26+113%
Arqit (ARQQ)$21.2+112%

We cover SPACs that are relevant to our audience, and by doing so, we’re able to analyze them as an aggregate to see how the “SPAC asset class” performs over time. We believe it will underperform as a whole, which is why we haven’t invested in a single SPAC yet. Will Forge Global be the SPAC that finally captures our hearts?

About Forge Global Stock

Click for company website

Founded in 2014, San Francisco fintech startup Forge Global took in just over $238 million in disclosed funding to develop a secondary market – a platform that lets people trade shares of startups before they’re offered to the public through initial public offerings (IPOs). That core platform allows the company to capture a commission on both sides of a trade, what they refer to as a “take rate.” That’s one of three sources of revenue for the company:

  • Core Markets Platform – allows institutions and accredited investors to trade shares in private companies
  • Forge Trust – approximately $14 billion in assets under custody and about $600 million of cash across 1.9 million customers.
  • Forge Data – subscription-based offering which offers access to the data the platform generates – goes live in Q4-2021

The Forge marketplace has nearly 400,000 registered users, including over 123,000 accredited investors who have conducted 19,000 transactions representing $10 billion in trading volume. Here’s an interesting chart from Forge’s glossy SPAC deck.

Forge's glossy SPAC deck. Credit: Forge
Credit: Forge

Having only 35% of retail investors trading more than once may be a testament to the “minimum investment amounts” being rather high for most startups on the platform. Just how many $25,000 minimum purchases can your average accredited investor make? These restrictions inhibit liquidity and that’s probably why the number of repeat trades from individual investors is so low. Just how will 49% of Forge’s client base react should an economic downturn take place? While institutional investors may continue to transact on the platform, having only 52% trading more than once also seems really low. Why?

This raises an important question regarding how reliant Forge is on trading commissions. It’s difficult to tell. In 2020, Forge took in $22.4 million in revenues attributable to Forge Trust. That would be about half their revenues, but then we also need to consider the acquisition of competitor SharesPost which hasn’t been aggregated yet.

Bar chart showing Forge's revenues. Credit: Forge
Credit: Forge

Investors need to consider what happens to the amount of assets under custody and trading volume if an economic downturn happens. A business model that’s flourishing in a red-hot market may not fare so well should the music stop. Following the transaction, Forge will have a $2 billion market cap and around $435 million in cash on their balance sheet. By now we’ve seen enough to decide whether or not we want to hold the stock.

Should You Buy Forge Stock?

You can do whatever you like with your hard-earned money, but we’re not planning to buy shares of Forge at any price. It’s not just because they decided to go public by merging with a SPAC called Motive Capital Corp. (MOTV), it’s because they’re currently enjoying a booming market unlike anything we’ve seen since the dot-bomb era. The amount of money flowing into startups, the number of unicorns, and the money being raised through IPOs are all at record highs.

There’s never been a more appropriate time to view the markets with caution. In a worst-case scenario, you’ll miss out on some upside. In the best-case scenario, you’ll avoid having your ass handed to you if the markets turn south. We always like to throw up this chart to put things into perspective (that red X is how the market reacted to The Rona).

A chart showing the 30-year return of the Nasdaq
30-Year Nasdaq chart – Credit: Yahoo Finance

The latest calamity the market doesn’t seem to have priced in is the state of the global supply chain with industry groups warning of a “global transport system collapse” if governments don’t address the problem. The global pandemic has wreaked havoc, from restrictions on supply chain workers, to a delayed bullwhip effect from having the word shut down in 2020. There are numerous reasons to view the markets with caution, especially if you take a risk-averse approach to tech investing. Our belief is that Forge will take a big hit if the market turns south, so we’re avoiding the stock.


One reason loads of money is flowing into startups is that they’re exiting at a record pace. The SPAC vehicle is a major contributor to this surge in exits, and it’s ironic that a company which benefits from SPACs chooses a SPAC itself. And who can blame them. SPACs are a great way to raise cash before the music stops. If that does happen, Forge has placed themselves in a much better position to weather the storm.

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