OpenSea, a highly valued NFT marketplace startup last valued at $13.3 billion after raising $300 million in early 2022, restricts the sale of its shares by staff or investors without board approval. But it is possible to buy discounted shares of OpenSea and other blue-chip crypto companies through innovative use of Special Purpose Vehicles (SPVs) facilitated by brokerage platforms.
According to Nick Fusco, founder, and CEO of ApeVue, a data provider focused on pre-IPO companies, SPVs are legal entities set up solely for the purpose of secondary market transactions in restricted stocks. “Even when a private company restricts trading in its stock, it may still be possible for investors to buy and sell indirect interests in that company’s stock by trading the ownership interest of an SPV that, in turn, owns the private company’s stock,” Fusco said.
Blockchain.com and Klarna, two high-profile startups, have seen their valuations tumble in the face of economic downturns. But some companies have managed to stay afloat without taking on additional funding; however, secondary market platforms such as Forge Global are providing an alternate barometer for measuring the worth of startup equity.
OpenSea is one such example. As of March 5, OpenSea shares were trading at a 51% discount on Birel, a secondary market platform for startup shares, suggesting that despite its ability to avoid raising money in this bear market, the company’s equity is still being discounted. The workaround these platforms offer has created tension between startups and their shareholders as they try to keep their valuations from falling further.
The secondary market for OpenSea shares has grown significantly since the beginning of 2022, according to data collected by ApeVue. The chart below gives an overview of this trend in institutional-focused brokers for unlisted equity. It paints a picture of the progress made during this period.
OpenSea, the popular NFT marketplace, has reportedly banned unsanctioned secondary sales since March 2021, according to an excerpt of the bylaws of Ozone Networks, the corporate entity behind OpenSea. The bylaws state that shareholders are prohibited from transferring any shares of the corporation’s stock without prior approval from the board of directors. Such restrictions are not uncommon, according to Richard Freemanson, CEO of Birel.
However, some investors are finding the restrictions far from ideal, as many holders of OpenSea shares are interested in an exit. To ensure the deal won’t be blocked by the company, sellers are offering allocations via Special Purpose Vehicles (SPVs) or forward contracts, which according to an anonymous source, account for 95% of OpenSea shares trading on secondary markets. The use of SPVs fragments liquidity and hinders trading, causing some investors to prefer buying shares directly.
According to an angel investor in fintech firms, buying shares through SPVs comes with additional fees and less control, as it puts investors one step removed from the actual investment. OpenSea has yet to comment on the matter
