Morgan Stanley at Work released its new report Liquidity Trends: Perspectives from Private Company Leaders, spotlighting how private markets are responding to the challenging macro environment by strategically evolving their equity and liquidity programs.

“Amid market uncertainty, this report underscores the message that liquidity events and innovative equity programs are imperative to stakeholders across the private markets, from initial founders and venture capitalists to entry-level employees and private investors”

Data shows that 81% of private company decision makers are being influenced by the economy in executing liquidity events in their industries. However, with private companies choosing to stay private longer (37% now plan to stay private, while 34% are unsure or questioning next steps), the traditional liquidity path of going public is becoming more elusive. At the same time, there is heightened demand for liquidity to support talent attraction and retention efforts. These simultaneous pressures have pushed innovative liquidity solutions to the forefront as a business strategy to help private companies balance long-term goals with rewarding employees.

Specific takeaways from the report include:

1. Increased demand for private market liquidity events is coming from all sides: Almost two thirds (59%) of private company decision-makers reported increased expectations for a liquidity event from investors, C-suite executives, and equity-holding employees. Additionally, nearly all (93%) said having a liquidity event is valuable to a prospect’s decision when considering a job offer.
2. Staying private longer creates opportunities for resilience and growth. By delaying IPOs, private companies maintain greater control amid market challenges while also nudging private capital markets to adapt for more tender offers and direct secondary sales—a trend that’s on track to continue. For example: From 2012 to 2021, global investments in direct secondaries across the venture market increased from $13 billion to $60 billion and are projected to reach $85 billion in 2023.
3. Private market liquidity events must address myriad goals. Private companies reported the top reasons they leverage their equity plans are to validate employee performance (85%), align business/employee goals (84%), and other fiscal business-related objectives—indicating that private liquidity events must continue to evolve to help meet complex business needs beyond simply building personal wealth.

“Amid market uncertainty, this report underscores the message that liquidity events and innovative equity programs are imperative to stakeholders across the private markets, from initial founders and venture capitalists to entry-level employees and private investors,” said Jeremy Wright, Head of Private Markets at Morgan Stanley at Work. “Unlocking the potential of liquidity opportunities has become a business essential—both for the organizations and the individuals who make private capital markets tick. Clear-sighted solutions that balance possible future states against current challenges can deliver value and protect long-term vision during volatile times.”

The full findings of Morgan Stanley at Work’s Liquidity Trends: Perspectives from Private Company Leaders can be found here.

Methodology: The report was researched and authored by Rebel, a third-party research and strategy agency. The findings are based on a survey of 311 U.S.-based private company decision-makers. Participation was limited to private companies that currently offer an equity plan. In addition, qualifying companies had to meet at least one of the following criteria: a valuation of $400 million or more, completion of a fundraising round of a Series B or higher, or greater than 200 employees. All respondents reported that their job responsibilities included selecting the equity management platform or managing their company’s cap table and equity plan. The survey was written in English and delivered online to a United States audience in January 2023.

Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and/or its affiliates, all wholly owned subsidiaries of Morgan Stanley.

Source: Morgan Stanley at Work