The SEC's Small Business Capital Formation Committee held a public meeting on Feb. 24 to discuss the private secondaries market, noting an uptick in tender offers.

Committee members called it "a phenomenon that was not common before.” Secondaries will remain disproportionately concentrated in a narrow group of sectors this year — AI, crypto, defense and aerospace stand out as "clear beneficiaries."

"If the competition for talent intensifies, especially for AI startups, liquidity has become a crucial component for employee recruitment and retention, which is why we’re starting to see so many ventures’ most valuable startups post tender offers regularly," Emily Zheng, senior research analyst at Pitchbook, said at the meeting.

Some of the largest companies in the private markets space, such as SpaceX, Anthropic, and OpenAI, are all looking to IPO this year, potentially leaving a big gap in the secondary market. 

"If several pursue IPOs around the same time, public market capacity and investor appetite could become overwhelmed. A pickup in IPO activity is an overall boom for the market, although we might see a large dip in secondary volume in 2026," Zheng said.

Despite this, Zheng feels that the secondary market is strong and that investors will continue to capitalize on the "most rapidly developing market." 

"The market is moving from proven relevance to becoming an embedded structure. In 2026, we'll test whether the market can operate efficiently, absorb volatility and really redistribute liquidity beyond a handful of elite names," Zheng concluded.

‘A Cautionary Tale’

Paul Atkins, chairman of the SEC started off the meeting with remarks regarding the private secondary markets “critical role in meeting liquidity needs.”

There have been two issues that have been brought to light as more firms remain private, Atkins noted.

The demand for investment opportunities in private communes and the need for liquidity among existing early-stage investors.

Atkins noted that it is his “priority to reinvigorate an IPO pipeline that has diminished by roughly 40 percent in recent decades.”

“As I recently testified before Congress, this trajectory tells a cautionary tale that the SEC is working to rectify, first, by re-anchoring disclosures in materiality so that investment decisions can turn on economic signals rather than on regulatory noise; second, by de-politicizing shareholder meetings and restoring their focus to significant corporate matters; and third, by allowing public companies to have litigation alternatives so that we shield innovators from the frivolous and investors from the fraudulent,” he said in his remarks.

While companies with larger scale can easily go out and fundraise for capital, or have a tender offer to get liquidity, it is much harder for smaller companies to do the same. Costs would need to be lower and there needs to be less regulatory hurdles to jump through before smaller businesses can consider an IPO in this current market, the committee members discussed during the meeting.

"Three speakers back to back showed us where the capital is going right now — to very large cash heavy companies that don't actually need the cash. They are not the ones that are feeling this burden," one committee member stated.

The SEC committee plans to bring on other speakers at their next meeting on April 28 to discuss how the SEC might be able to help small businesses gain a pathway towards liquidity in the current market environment.

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