Getting your hands on secondaries in the Swedish battery manufacturer Northvolt has not been an easy feat for those hoping to buy secondaries in the much-hyped startup. That is set to change.
The Swedish, member-driven investment company Tioex is today announcing that it has acquired 5m SEK (about $500k) of existing shares in Northvolt. And, although it’s a tiny portion of the $13bn total of equity and debt that the company’s raised, this is only the beginning according to Tioex founder Johan Hägglund.
“Generally speaking, the closer a company gets to an IPO, the more likely they will start reporting quarterly and become more market-ready. This could also lead to some form of ‘grey market trading’,” Hägglund says.
Grey market trading refers to the buying and selling of existing shares (secondaries) in privately held companies, which is becoming increasingly popular as a way for investors to free up liquidity in a tough fundraising climate.
But buying secondaries isn’t always easy for a couple of reasons.
One is that existing shareholders often have the right of first refusal to buy equity that becomes available, meaning they get first dibs before new investors get a chance to get in on the action. The other is that certain shareholders, such as employees, may be contractually blocked from selling.
Selling secondaries can also be an issue for the startup in question, as a bigger number of investors on a cap table can make things more complicated when the company is sharing sensitive information with shareholders.
Possible leaks make companies shy away from secondary sales
Northvolt has become Sweden’s highest-valued scaleup and was valued at around $12bn in 2022. As well as planning new factories in Canada, Sweden and Germany, it is also rumoured to be planning an IPO as soon as 2025.
Hägglund says that Northvolt conducted a rigorous review process to ensure Tioex’s trustworthiness
“The process took a very long time. We started it after the turn of the year. It took four months because everything was so sensitive. There is high scrutiny around who is buying and how it is done,” he says, going on to add that buying secondaries tends to get easier in subsequent deals.
“If you compare it with the first time we bought secondaries in Klarna, they were super sensitive from the start, now it is much easier.”
Member-driven investment company
Tioex, founded in 2019, is member-driven and invests based on what its 6k members want. If they want in on a deal, they need to invest a minimum of 50k–100k SEK (€4.4k–€8.8k), and will be allocated shares depending on how much interest there is among other members and how many shares Tioex can secure.
The company has secured secondaries in several companies including Elon Musk’s SpaceX, US-based AI company Anthropic, Swedish EV unicorn Einride and payment giant Klarna.
In the case of Northvolt, only a dozen high-value members were asked if they wanted secondaries in the company. Because of the scrutiny involved, Hägglund didn’t want to jeopardise the deal by bringing more people in.
“We noticed a very high interest among the few members we approached. I hope that in the future, we can offer more of our members the opportunity to increase their holdings if we can secure more secondaries,” Hägglund says.
