Forge Global Holdings, Inc. (NYSE:FRGE) Q2 2022 Earnings Conference Call August 11, 2022 5:00 PM ET
Dominic Paschel - Senior Vice President
Kelly Rodriques - Chief Executive Officer
Mark Lee - Chief Financial Officer
Conference Call Participants
Devin Ryan - JMP Securities
Michael Cho - JPMorgan
Owen Lau - Oppenheimer
Ladies and gentlemen, good afternoon, and welcome to Forge’s Second Quarter Fiscal 2022 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions [Operator Instructions] Please note that this event is being recorded and transcribed.
I would now like to turn the conference over to Dominic Paschel, Senior Vice President at Forge. Please go ahead.
Thank you, Abby, and thank you all for joining us today for Forge’s second quarter 2022 earnings call. Joining me today are Kelly Rodriques, Forge’s CEO; and Mark Lee, Forge’s CFO. They will share prepared remarks regarding the quarter results, and then take your questions at the end.
Just after market close today, we issued a press release announcing Forge’s second quarter financial results. This conference call is being webcast live and will be available for replay 30 days, beginning about one hour after the conclusion of the call. There’s also accompanying investor presentation on our Investor Relation page. During the course of this call, we may make forward-looking statements based on current expectations, forecast and projections of today’s date.
Any forward-looking statements that we make are subject to various risks and uncertainty, and there are important factors that could cause actual outcomes to differ materially from those included in statements. We discuss these risk factors in our SEC filings, including in our quarterly report form on 10-Q for this quarter, which we will file soon and can be found on the IR site as well. As a reminder, we are not required to update forward-looking statements.
In our presentation today, unless otherwise noted, we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company’s performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release, which is also on the IR website. Today’s discussion will focus on the second quarter of 2022. As always, we encourage you to value Forge’s performance on an annual basis, as well as quarterly results can be affected by unexpected events outside our control.
With that, I'll turn the call over to Kelly.
Thank you, Dom. Good afternoon, everyone, and thank you for joining us today. We deliver our results to you this quarter against a continued backdrop of heightened market volatility. Despite this turbulence, we remain steadfast on building toward a long-term vision with a commitment to build prudently, while delivering on the strength of our balance sheet.
With that, we will share with you our second quarter 2022 results. I'll briefly touch on the broader market context within, which we're all operating before moving into our results and business highlights.
As you're all aware, much like in the first quarter, Q2 was characterized by the full quarter's impact of ongoing macroeconomic headwinds, including inflation, rising interest rates, and new workforce reductions across the corporate landscape and geopolitical anxiety with the ongoing work in Ukraine.
Investors and companies continue to reset expectations and valuations. The IPO window remained almost completely closed and the public markets continue their volatility.
And yet, and we said this before, the private market opportunity remains as clear in volatile times as it does in stable times. As the timeline to liquidity pushed further in, further out private companies need for liquidity solutions and the investor opportunity to access private companies at attractive prices become more pronounced.
We believe we're well positioned for market stabilization, as more new companies continue to arrive on the Forge platform and as investor and equity holder expectations trend toward equilibrium.
Some of the market insights we noted in our Q2 private market update released in late July, show that while companies in Q1 largely staved off, down rounds for primary financing. In Q2, we began to see the inversion of primary fundraising values, but companies in Q2 on average raising primary round at a discount to their previous rounds.
We also saw price compression in secondary trades. It took some time, but after consistently trading at a premium to the company's last primary round in Q1. In Q2, Forge saw secondary trade prices declined to an average 6% discount to their last fundraising round as buyers and sellers continue to engage in real-time price discovery.
On the secondary market, the number of unique issuers with shares offered for sale on the Forge's platform was higher than any other quarter. As companies delay IPOs, canceled stacks, markdown 409A valuations and liquidity in the public market remain out of reach for many.
For example, Instacart's valuation was reduced by key investors to $14 billion, a further reduction to the more than 38% Instacart self-administered in March, when it valued itself at $24 billion.
Last month, Swedish Fintech Company, Klarna raised new financing at $6.7 billion, down 85% from the $46 billion valuation, it secured just 14 months ago. And just recently, Stripe once the most Highly Valuable Private Company cut its valuation by 28%.
Following suit, on average, secondary prices fell 20.2%, and when comparing the price of companies that trade on Forge markets in Q1 of 2022 and subsequently this quarter -- or I'm sorry, in Q2 of 2022. And that's a 20.2% secondary price reduction.
Public tech indices made similar earnings during the same period with but the 2Q is falling about 23% and the IPO, this year falling about 32% through the end of the second quarter. And finally, Barron's recently reported over 300 companies are currently holding off due to deteriorating market conditions and canceled stocks are everyone.
However, even in volatile times, we continue to see new companies arriving at the Forge platform. The record number of unique companies that showed up to the platform in Q2 was accompanied by a slight narrowing of the spread between pricing, that sellers are asking for their shares and the price at which buyers want to buy.
The point at which average for sale prices and average buy prices converge is something we look forward refer to as price discovery equilibrium. We spoke about this previously.
In addition, the slight narrowing of the spread and declining prices could be signed that sellers are resetting expectations, as more private companies announce valuation reductions and investors continue to signal, they're seeking discounts to last year's prices.
Bid-ask spreads peaked at 19% in April of 2022 and decreased slightly to 18% in June of 2022, but spreads remain wide compared to the historical median of about 11% and we tracked since January of 2019. We appreciate and listening to the analyst feedback following our first public quarterly call at our introducing two additional business metrics. The first is the total number of companies with Indications of Interest or what are known as IOIs.
In Q2, they were up 26% year-over-year to 463, up from 368 in Q2 of last year. We became a public company through our marketing efforts, media recognition of our thought leadership and brand awareness. Forge is now becoming synonymous with the private market and the place people increasingly turn for insights, expertise and liquidity solutions in the private market.
This means, we are getting more private companies showing up to Forge, and this becomes latent economic power. Unique companies with sell-side IOIs also continue to build momentum and grow out, hitting an all-time high, up 75% over a year ago quarter. And as we've seen over the first half of the year, businesses are trying to calibrate inventory demand. Businesses as solely and big as Walmart have been saddled with inventory than buyers aren't mind as the supply and demand for resets.
But unlike those businesses, holding inventory doesn't cost for us anywhere. We're building the book in anticipation that price discovery equilibrium is reestablishing. We have optimism about the long-term as more unicorns continue to emit and the levels of dry powder poised for deployment into innovative technology companies remains hot.
So now on to Forge's second quarter 2022 financial results. In the second quarter of 2022, total revenues, less transaction-based expenses were about $16.5 million, compared to about $37.1 million in the year-ago quarter, which I will note was an all-time record in terms of revenue generation for Forge.
In the second quarter of 2022, as said before, there were more unique private companies with shares offered for sale on the Forge platform than in any previous quarter. And extremely encouraging to see relative to that inventory point I just made. Total custodial administration fees were flat year-over-year at $5.7 million and up 6% from Q1 to $5.4 million.
Also listening to your feedback, the second new business metric we are giving is Forge’s custodial cash balances. They totaled $680 million, up 10% year-over-year from $620 million. Our supplemental investor information on our IR site as the historical data for both new business metrics if you're interested.
Assets under custody increased 5% year-over-year to $15.3 billion in Q2, up from 14.6% in the second quarter of 2021. And I'd like to highlight some notable business highlights Forge made during the second quarter.
First of all, Forge Market. In Q2, our Forge Market and Custody Business segments delivered impressive updates in functionality and experience. New updates for Forge platform, include predictive analytics, the new machine learning to recommend the most likely buyer and seller of certain stocks, and dashboard features that enable faster more efficient trade, including IOI management capabilities that reduce the time it takes to close trades.
Forge Trust released a new client portal for self-directed IRA account holders, which gives the client access to key documents and enables them to more seamlessly execute self-directed transactions as well as improved support for their advisers and representatives.
Now on the Forge Data side, in our Forge Data business, we announced upgrades to Forge Intelligence, design to enhance the experience for our customers and provide even more visibility to the private market. Additional enhancements include front and center data on the biggest price movers on the Forge platform.
Visual summaries of trade activity now alert data customers the changes in pricing since they last logged in the Forge Intelligence and instantly summarize companies with the most prolific trading activity. Additional enhancements also include two new integrated data sets accessible to Forge Intelligence customers.
Membership Interest Transfers and Enhanced Public Marks data, providing users with an expanded breadth of data points to enhance pricing and valuation analysis. In addition to enhancement of Forge Intelligence, we extended volume-weighted average price of private stocks, known as VWAP, beyond data platform to Forge Market clients.
Extending VWAP to our markets clients is one more way that we're increasing the visibility participants have so they can confidently participate in the private market. We also continue to make traction and create new relationships through partnerships and alliances with multiple top-tier banks in the quarter, including signing an agreement with Morgan Stanley, under which Morgan Stanley may direct their customers' orders equity securities of private issuers to Forge Markets platform.
On hiring, we hired Johnathan Short, as our new Chief Legal Officer. Johnathan’s experience and leadership building and running, an impressive legal and regulatory organizations for the Intercontinental Exchange or ICE, parent company of NYSE, one of the world's most respected financial services company, and his expertise in corporate governance, M&A regulatory and government affairs is invaluable to Forge as we focus on our next stage of growth to enable an accessible, liquid and transparent private market.
Johnathan spent 14 years as General Counsel of ICE and was part of the team that built his [indiscernible] to a $45 billion public financial services company with both domestic and international operations. He grew the legal function from a two-person team when he joined to a team of 75 legal and regulatory personnel. We're very excited to have Johnathan on board.
I'm also pleased to announce we've promoted Jose Cobos to President in the quarter. Jose has been an integral and strategic leader for the business as we transition from private to public.
Now as responsible stewards of capital, we are taking a judicious approach to hiring, including growing our engineering team to accelerate technology development, we ended the quarter with 350 team members. Reflecting on the environment, we have slowed the pace of hiring and will continue to be deliberate in adding headcount.
However, the opportunity remains clear. Alternative, asset classes are growing, as clients continue to rebalance their overall portfolio. And as their advisers and RIAs continue to allocate towards alt in general, the AUM for alternative assets is expected to approach $13 trillion by 2025. And as a result, the private market trading for total addressable market is expected to hit $8 billion by 2026. Very simply, we want to be prepared to own the market.
So in this period of heightened market disruption and turbulence, we are still focused on building, both for now and for the future, with the goal of improving our trading platform to drive down the cost and time of trade, building the products that will continue to broaden access to this market, like lending and taxable customers, growing our strategic partnerships, and expanding our presence internationally and improving the way we deliver data and insight. So all of who interact with Forge get more value out of those engagements.
To be clear, we're also mindful of the critical need to build and improve. And so we are scrutinizing the ROI potential of every dollar we invest to prioritize the long-term profitable growth of the Forge platform.
We are helping investors, companies and private shareholders navigate this unprecedented market with our data, expertise and programs and believe it, with continued enhancements to our offering and with the value we're bringing to customers and potential customers during this disruptive time, we are well positioned to capitalize when markets stabilize.
Now I'll turn it over to Mark Lee, our CFO.
Thanks, Kelly. In the second quarter of 2022, Forge's total revenue, less transaction-based expenses, was $15.5 million, down from $37.1 million in the year ago quarter. Of that amount, total placement fee revenues reached $11 million, down from the second quarter of 2021, where total placement fee revenues came in at $33 million.
As Kelly previously noted, last year was an extraordinary year for the overall market, due to record public market debuts and significant flows of VC investments into private companies, with Forge achieving record quarterly revenues and high watermarks for year-over-year comparisons.
Transaction volume in this quarter was $332 million, a 64% decrease from the quarter ended June 30, 2021; the ongoing result of macroeconomic and geopolitical instability that continues to create dislocation. The average net take rate for the quarter was down 6% year-over-year at 3.2%. And as we previously described, fluctuations in take rates are generally attributable to changes in the mix of individual versus institutional block trades.
Total custodial administration fees were flat year-over-year at $5.7 million. Total custody accounts decreased 7% year-over-year to $1.7 million in the second quarter of 2022 from $1.9 million in the second quarter of 2021.
This decrease was driven by a onetime deactivation of billable in active accounts from one of our cash clients. The financial impact was negligible, and this is not a fact custodial cash balances. We expect account growth to continue and perform stress to benefit from continued interest rate increases.
Second quarter GAAP net loss was $5.1 million compared to GAAP net loss of $8 million in the second quarter of 2021. Adjusted EBITDA is another measure of our operating results. In the second quarter, adjusted EBITDA loss was $12.3 million, compared to adjusted EBITDA gain of $6.5 million in the year ago quarter. We've included a reconciliation of adjusted EBITDA to the most recently comparable GAAP measure both in the press release and in our SEC filings.
Cash flow from operations. Net cash used in operating activities was $18.2 million in the quarter compared to net cash provided by operating activities of $19.2 million in Q2 of 2021. The year-over-year changes for both adjusted EBITDA and cash flow from operations are primarily driven by lower revenues, but they also reflect our continuing investment in technology and growth initiatives.
We also are investing in finance, legal and risk infrastructure that will support our future growth. Kelly said, we're mindful of the evolving macroeconomic environment, and we continue to strike a balance between positioning for growth as well as being a prudent steward of investors' capital.
Cash flow from financing activities. Net cash provided by financing activities was $22.6 million in the three months ended June 30, 2022. The compared to net cash provided by financing activities of $32.7 million in the three months ended June 30, 2021. Cash balances from financing activities increased in connection with the redemption of our public warrants.
Of the approximate 18.5 million public warrants previously outstanding, approximately $2 million were exercised and cash proceeds generated from these warrant exercises were approximately $23 million. We were able to simplify the cap table and reduce shareholder dilution.
The cash and cash equivalents on the balance sheet ended the quarter at approximately $205 million. From a housekeeping perspective, our weighted average basic number of shares used to compute net loss was 167 million shares and our fully diluted outstanding share count as of June 30, 2022, was 189 million shares.
Within our supplemental investor information on our IR site, we've also provided an estimate for Q3 and Q4 of our average basic common shares outstanding and our non-cash stock expense for modeling purposes.
We outlined during our first quarter conference call, given the continuing volatility and uncertain market conditions, Forge is not in position to provide guidance at this point in time. Forge will continue to monitor and evaluate to determine whether to change our forward guidance practice in the future. It is important to note, as August has historically been a seasonally slow one.
Inevitably, there are tough comps from our all-time record first half that we saw in 2021. But as markets stabilize, we expect our growth to resume to normalized levels relative to the huge opportunity in front of us.
While managing to this environment of uncertainty and high market volatility, we're actively managing our cost and investment, be good stewards of capital, while maintaining our focus on growth and building the company. We continue to invest in technology and sales and marketing to support our growth.
As we scale and our investments bear fruit, we expect our costs to deaccelerate as a percentage of revenue. We ended the quarter with 350 in total headcount, up 36% year-over-year. Our most important asset is our people and we will continue to invest in and expand our employee base at an appropriate albeit at slower pace. This is a very important consideration that the management and Board continually evaluate in real-time.
So, let me hand the call back to Kelly.
Thank you, Mark. In closing, I want to thank our shareholders for their confidence in Forge and our vision for building the private market future. The second quarter has been a challenging economic environment for all companies and especially, challenging environment for that the companies whose shares are traded in the private market.
In private markets, it takes time for company valuations to recalibrate when there has been broad-based market turbulence like we're experiencing today. The valuations will recalibrate, that is a fundamental tenet of how markets work. And when they do, we believe we're well-positioned.
In the meantime, through our data, our expertise, our market insights, we're helping the participants in the private market to navigate this moment and we'll continue to go prudent so that we don't miss the opportunity that we have in this moment to convert that latent economic power into closed trades to cement our leadership position and to advance our powerful trading engine to deliver greater value for our customers and our shareholders.
Dom, I'll turn back to you.
Abby, we are welcome -- we're open to taking questions from the audience.
Thank you. [Operator Instructions] We will take our first question from Devin Ryan with JMP Securities. Your line is open.
Hey. Thanks. Good afternoon everyone. Thanks for taking the question.
Thank you, Devin.
I guess really where I want to start here is kind of this conversation around markets moving into the equilibrium and I appreciate all the detail you guys provided. And I also appreciate July and August, probably aren’t going to be necessarily great months to judge engagement. But can you maybe just talk a little bit about the monthly progression in terms of what you guys have been seeing over the course of the second quarter into the early days of the third quarter. And assuming that we are kind of moving closer to equilibrium as you talked about, I'm assuming we'll see an improvement in the number of trades and so hopefully, reacceleration there that's meaningful. And then also, how should we think about kind of the volume per trade to the extent we're maybe a lower price environment?
Let me start. This is Kelly. Let me start with the first part. We, as you can imagine, are watching the data carefully. And clearly, from our last call, we continue to see a market that's driven by more sellers than buyers. And while we're watching the bid-ask spread, it's also important to understand that these are averages. We are careful to not overstate what we think could be indications that the market is turning. However, given some of the facts that we cited including valuations being accepted now by companies and even proactively being moved by companies. Some of the trade activity that we see relative to what the bid-ask spreads were in the previous period, we're hopeful that equilibrium is coming.
I'd say, as Mark pointed out, this has historically been a seasonal time of year when institutions sometimes are off, whether it's vacations or what have you. But we do believe and have said in the past, that in periods of volatility, as we saw during the pandemic, the first movers were institutions coming back in to buy at attractive pricing. So we're watching that carefully. We are not seeing meaningful changes in our fees if you're asking that around the lower price environment, but we definitely are seeing trades getting done now at prices that weren't getting done in Q1. And so I'd say we're going to continue to watch it. The last time we saw anything disruptive like this in 2020, it was about two quarters, but there's a lot going on in the world right now that we don't control. So I'd ask Mark to jump in if I'm not hitting any of the other points that indicate what we're seeing as a sort of forward look.
Hey, Devin, a couple of things, I guess, I would mention. One of the things is that we typically don't see significant movement and don't expect to see significant movement in the average size of the trade. As typically institutions that are on our platform looking to take a position in a particular name are usually looking to take a certain bite size that has a meaningful impact, right, to their portfolio. So if there's a price decrease in a particular stock, more often, what you'll see is they will be acquiring more shares at a lower price in order to take a position that that is meaningful to the size of the portfolio.
The other thing that I would note is that -- no, and we're all watching this. But at the macroeconomic level, I mean watching the public markets and looking at the volatility and looking for the moments when you feel that the public markets are starting to normalize or stabilize. I think that that's an important kind of factor that we keep an eye on, because it will encourage the buyers to jump back in the market, same with kind of the views on the Fed, if there is cause that Fed will start to slow the pace of increase of interest rates.
And then finally, with regard to your comments about July and August, it's important to note that that as we kind of start to see improvement in our engagement in our matching and trades with our clients. There is a time lag in the private markets for the time that, it takes to close and settle trades. It's not the kind of same process, the three plus, one plus two, two plus three kind of in public markets. And so that's another thing that obviously has to be taken into consideration.
Okay. Great color, guys. Thanks so much. Just as a follow-up here, maybe just hit on expenses. Obviously, I appreciate we don't have guidance, but Mark, maybe a little bit just more context around how you're thinking about spending and whether that's evolved at all just given the shifting market backdrop and whether maybe you're reprioritizing into certain areas, or pulling back in certain areas. You still see that you're hiring and obviously, it's such a big addressable market and secular opportunity. But in the near term, has the thinking shifted at all around where to spend or how much to spend?
Yes. Let me – Devin, let me handle that question first. This is Mark, again. So – and as a reminder, I think we've mentioned this kind of an Analyst Day, although that's some time passed down. But this as a backdrop, with the exception of the second half of 2019, Forge has been a positive adjusted EBITDA company since 2017. And our operating philosophy has always been and remains to run this company with positive to breakeven adjusted EBITDA, with breakeven to slightly negative operating cash flow. And in fact, we entered 2022, no difference, right? We were targeting 2022 to achieve positive – slightly positive adjusted EBITDA.
So while the current macroeconomic environment has significantly affected our top and bottom line for 2022, we continue to believe that the right approach is to moderate our spend but to stay focused on building the business for the long-term benefit of our shareholders. And so to kind of directly answer your question, and as you pointed out, I mean, the opportunity in the TAM for this business has not changed.
If anything, I think our clients need our support and services even more so in this time of turbulence. And so – we think that at this phase – in the evolution of Forge, now it's not the time to pull back significantly, we have to be prudent. So we're moderating the pace of our hiring.
We're very cognizant of that. We're watching it closely. But we need to continue to build out the infrastructure for the future of being the leader in this space. And so that's our goal. As Kelly said, a lot of our growth that we've been focused on is continuing to build technology, our marketing and go-to-market efforts, and have also making sure that we're providing the finance, legal, and risk that we need to support our future growth, so.
Yes. I guess I wouldn't get much other the fact that we did slow. We've made a deliberate move to slow hiring at this point in 2022, and we're going to watch the rest of this quarter before we make any decisions on the acceleration of that -- of those staffing plans.
And Devin, the one other thing I might add is, with the cash in our balance sheet, I think we feel like we're in a significantly stronger position than many of our direct competitors. And in fact, now is the best time they cannot capitalize on that gap and that difference the competitive advantage we have the wherewithal, I think, too, and we believe that we have the wherewithal to kind of get through this period and to stay focused on growing the company.
Okay. Well, really awesome answers and appreciate the time. Thanks, Kelly and Mark.
Thank you, Devin. Abby, next caller.
Yes. We will take our next question from Ken Worthington with JPMorgan. Your line is open.
Hey, good afternoon. This is Michael Cho for Ken. Thanks for taking my question. Mark, I guess I just wanted to touch on the last point you highlighted around the balance sheet. I just realized that you're moderating spend is long hiring, but again, as you mentioned, you have the very solid balance sheet during this kind of press period. So I'm just curious if there ways you're considering, as you mentioned, to take advantage of the situation, whether organic or inorganic, just given your balance sheet trend today.
Yes, I’ll start and Kelly can chime in, Michael. I appreciate the question. Look, I think that since kind of we spoke with everyone kind of went through Analyst Day, our first quarter presentation, we outlined kind of a number of key initiatives. And really, in the quarter of time, that hasn't changed materially, building out our core business, continuing to improve our technology and increase the efficiency of our trading process, building our data business, which we're really -- we continue to be really excited about in terms of the opportunity, and we think the reception that we're getting from the market.
We talked about lending being a new product that we're working on and that we expect to kind of roll out in the future. And then Kelly also mentioned international expansion, all of these things are things we've talked about. And these are the things that we're focusing on building. We think there be kind of will help us to be successful. So that's what we're funding through our technology and our go-to-market and marketing hiring, and we'll continue to do so.
Yes. I'd add on the M&A side. Part of the reason we went public was because, we felt there was an opportunity to continue on organic growth, as while looking selectively at M&A targets. We think the market will create some opportunities for us. We're going to be really careful. But we think that there are opportunities that will advance for us to look at in the market as periods of liquidity not only helps our core business problem that we're solving, but provides us with opportunities to scale inorganically as well.
So I think we have to be really careful and mindful of our balance sheet. But as Mark pointed out, this is a time of relative strength for us that making a move with inorganic could be in our best interest if it's the right kind of deal price at the right point. But again, a lot of sellers out there, whether they're on our platform or not are being careful and are watching valuations carefully and so are we. So we're going to keep our heads down. We're going to continue to build. We've got a great team of people here and I think if anybody on this call looks at the opportunity and scale of the private markets, you're going to want a team that's committed poised capitalized to go out and execute on that, even if the short term looks a little tough. So, we're ready and very excited about continuing to keep our heads down and executing.
And Michael, and the last point, I want to reiterate, Kelly mentioned this, but we announced the agreement that we signed with Morgan Stanley. So with a roster of partners including Morgan Stanley and Wells Fargo and BNP and others that we're working with or others that cannot be named, that's another important part of building out the Forge brand and platform out to the market. So, I just want to kind of stress that point. So that's another important element of our strategy.
Great. Thank you for that. Excellent. And just a follow-up. I just wanted to make sure I caught this correctly. Kelly you mentioned, you talked to this a little bit, but can you talk about spreads being kind of 19% at the start of the quarter and heading into '18. Did I hear that correctly, where you should assume, there is some transaction volumes picked up as the quarter progressed. Really, I'm just trying to get a characterization of how you characterize activity or pipeline exiting Q1 versus exiting Q2? Thanks.
Yes. So look, I guess the point there to be really clear is that, the difference between '19 and '18 doesn't really indicate a meaningful shift in volume so much as a little shine of life that could potentially be viewed as an indicator of what's to come. But in terms of volume, I think the number that I also cited was that, if you look back over a couple of years like a broader dataset, you see bid ask spreads around ’11 [ph] that really were present during the period of an incredible volume that we saw in 2022. So, we've got a little ways to go but we're all sitting here like everybody else, optimistic about that equilibrium moving closer towards that point where we start to see trades happen. So, I wouldn't go out as far as to say that '18 is a meaningfully better number than ’22.
Michael to -- and to reemphasize some of the points that was said – that were mentioned earlier and the fact that we're starting to see our trade at valuations that are below the last round is an important indication that the private market, shareholders are starting to acknowledge and recognize the decrease in their valuations and the multiples that they had previously been trading at.
And the example of Barna [ph] right an Instacart and Stripe. I think we will continue to see private companies start to realize and you start to see as they continue to raise money from the Venture world, you'll start to see those reduced valuations recognized in both the primary and secondary market. And I think we're encouraged by that trend.
Mark, a question on email here. If valuations decline and the take rate is constant. Does that mean your revenue associated with the decline evaluation, what's the dynamic associated there for [indiscernible]? I think that was the question that was asked by Devin. So the question is, I guess, with lower valuation then high lower trade size and below our trade size implies lower revenues, right? And I think, historically, we have not seen that. Historically, we've seen the people want to trade at a certain size in order to -- if you wanted to put $100,000 to worth or $0.5 million worth in a private company and the private company stock is down 30%.
You’re not necessarily going to reduce your trade down to $350,000 on trade. Still want to buy. You still want to take a meaningful right sized position in that stock. So you'll still buy $500,000 stock because this get more shares due to the lower price. So, that's historically been kind of the pattern that we've seen. So, we don't expect a direct relationship between decreased valuation and smaller trade size.
The other thing I would remind people is, again, when you kind of go back to the TAM, when you think about the total addressable market, the valuation of private companies, the relatively low base of trading activity that Forge and our competitors currently trade, right? This is a staff that was in our prior Analyst Day position a presentation. But even Forge as the leader in this space, the total volume in 2021 that we traded in those private companies, they were on our platform, there’s only 0.2% turnover.
So the opportunity -- even if there was some minor management the valuation. There are just so many more companies to trade, so much more opportunity to give shareholders liquidity than kind of where we are today. So that, again, this gets back to the massive TAM and the opportunity and the early stage that we're at in this opportunity. I'm sorry, Michael. Do we finish Michael?
Michael, do you answer all your questions?
Yes, most of. Thank you, sir.
Okay. Thank you. Abby, I think we're ready for our last question from Owen.
Yes. Thank you. [Operator instructions] And we will take our next question from Owen Lau with Oppenheimer. Your line is open.
Thank you for taking my questions. So, I saw that your total custodial accounts declined sequentially from $2.2 million to $1.7 million, but your assets under custody actually increased from $14.9 billion to $15.3 billion. Could you please explain a little bit more on these dynamics? Why account went down, but assets went up? Thanks.
Hi, Owen. Yes, this is Mark. Let me answer that question. So -- as we said, as I said earlier, the decrease, it’s -- you're exactly right. The quarter-over-quarter change was more significant than the year-over-year change. But this was a onetime deactivation of accounts. These were billable accounts. These were accounts that we were charging fees on, but these were inactive accounts for our clients who said this is our custody as a service business where we provide custody to other financial institutions. And we had a past client that had inactive accounts that -- and therefore, when they were to deactivate these accounts, it had -- did not have an impact on the amount of assets under custody, because these are inactive accounts.
Got it. So my follow-up is about the indications of interest. And I try to understand how to leverage this information, I think you mentioned that the total number of companies were 163, and up 26% year-over-year. I understand that we need to think about demand as well, the supply/demand imbalance. But historically speaking, when you see this increase in indication of interest, how long does it take them to start issuing and trading shares? Thanks.
Why don’t you go ahead and take it, Kelly.
So Owen, I think the thing we're excited about is the increased understanding and awareness of Forge as we've become a public company, as we continue to invest in marketing to help people understand, Forge is there to meet needs in the price markets. And I think what we're saying is, as a result, we're seeing an expansion of the amount of private companies that have shares available for trading on our platform.
And then, obviously, as you've heard us describe, price discovery equilibrium, there's other elements that have to drive or have to happen for those IOIs to translate into closed trades and revenues. Obviously, we've spoken about the spread, bid ask spread, and that's an important variable. That has to obviously, prices have to meet, and so you can have a bigger limit order book, but if the spread between bid and offer remains elevated, that's going to be a challenge to get those trades closed.
And then as we've said, we're seeing record levels of sell-side activity and representation in our book. And so, we're very encouraged about that. But that's what we're describing as the late in economic power, because once the buyers regain the confidence to engage, once they move from a risk cost position, and they're willing to kind of come back in with your dry powder right, then the inventory is there to meet the demand. And then that -- it's at that point that we'll start to see the rebound in recovery.
I guess the only thing I'd add here is that, sometimes when we're presenting the data, it's presented in averages. And so what's lost in that is depending on the name, the time between when IOI comes on to Forge and a trade can happen is going to rely on interest in that name than the mindset of the seller, particularly in this particular environment where you haven't or just recently seen signaling the market around companies lowering the valuation expectation. This is still a market that's looking around.
And while our data product helps people navigate what's come before them. What you're seeing happen in Q2 is companies starting to signal lower valuations, and you're seeing that also in the primary fundraising data, which make sellers more likely to enter into a transaction that they may not have entered into previously.
And so the IOI as we described, as Mark talked about in terms latest inventory really starts to move once buyers and sellers show and demonstrate a willingness to meet and make a trade. So that first trade in this period is part of what starts to establish that T&E. And then we start to reach that period of equilibrium across the board, but it really starts with individual names. And right now, what we're presenting as averages.
But internally, on the desk, we're watching the individual names. And I'd say the good news is signal that we're getting across the board from companies as noteworthy, as strike, all the way down the line, starting to signal officially, that they're raising money or proactively reducing the valuation of the public. So, we'll continue to watch that, and we're optimistic that when it does come back, we're going to be in a very advantaged place to take and deliver on the scale and the technology and data that we've built.
Got it. Thank you, very much.
Abby, unless we have any additional questions, we look forward to -- we'll be out on the road in San Francisco, New York and Boston this coming quarter. And so we're hoping to meet in person for the first time in a couple of years. And we appreciate the time you've taken to balance our call.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.