This episode of Bankless features Dio Casares from Patagon exploring the massive, largely unregulated secondary market for private company shares, focusing on Anthropic. The discussion reveals a 'Wild West' ecosystem of SPVs, brokers, and potential fraud, where employees and insiders profit from selling access, while the market's complexity and lack of transparency pose significant risks to investors, especially upon an eventual IPO.
Summarized by Podsumo
The secondary market for private companies like Anthropic is estimated at tens of billions of dollars, with fees often exceeding 10% plus carry, making it more lucrative for many than primary capital investments.
Fraud and negligence are rampant, with Dio estimating 10-20% of deals may be fraudulent, while complex 'nesting doll' SPVs create layers of fees and delay risk that can cause major issues at IPO.
The market functions as a 'gold rush' with insiders openly leveraging their access for personal gain, from using Anthropic access as dating profile bait to brokers making more money than their entire net worth from a single deal.
The lack of regulation and proper due diligence leads to high risks, including the potential for shares to be voided by the company (e.g., the XAI employee forward lawsuit) or for GPs to misappropriate funds.
Dio predicts a messy resolution at Anthropic's IPO, with potential lawsuits and losses for smaller investors who may have bought fake or illiquid shares through multi-layered SPVs.
"Even people at funds, they make more money doing these kinds of transactions now than doing primary capital into deals. And so a lot of people are shifting into this market because of that. — Dio Casares"
"I talked to someone the other day tragically to European small family office that I'd invested in... I believe that the GP of that fund... the broker didn't tell the LP and just kind of wanted to hold it and try and trade it... — Dio Casares"
"There's a lot of people selling picks and shovels. — Host (Ryan)"