Last month, Brett Adcock, the founder of robotics startup Figure AI, announced via a post on X that his company had become the most sought-after private stock in the secondary market. However, Figure AI subsequently issued cease-and-desist letters to at least two brokers involved in these secondary marketplaces, demanding they halt the promotion of the company’s stock.
These notifications came to light after a Bloomberg report revealed that Figure AI was seeking to secure a $1.5 billion funding round, purporting a staggering valuation increase from $2.6 billion to $39.5 billion. Brokers who received the letters indicated that this was the first time they had experienced such requests from Figure AI, which reportedly has a history of sending similar letters to unauthorized brokers.
A spokesperson for Figure AI clarified that these cease-and-desist actions are standard practice for the company, ensuring that no broker can sell its shares without the board’s permission. They emphasised their commitment to controlling stock market activity surrounding their shares, thus protecting against unauthorized trading.
As a private entity, Figure AI’s stock cannot be traded freely like public companies, creating a demand for secondary markets. Such markets have emerged to offer shareholders alternative methods to monetise their shares before an initial public offering (IPO), including secured loans based on their stock.
The brokers receiving cease-and-desist letters suspect that some company founders are averse to secondary market trading due to concerns that shares sold at lower prices could dilute the value of new investment rounds. Sim Desai, the CEO of secondary shares marketplace Hiive, pointed out that companies may view these sales as a zero-sum game. Conversely, he argued that increased trading in the secondary market could attract more interest in primary fundraising.
The effectiveness of secondary market activity in eliciting investor interest hinges on the perceived company valuation. As Desai noted, a sluggish secondary sale may merely reflect issues related to pricing and not a lack of available capital.
Figure AI has also made headlines recently due to its collaboration with its notable client, BMW. The company’s response to inaccuracies in media coverage has included mentions of potential legal action.
The future of Figure AI regarding its fundraising efforts and subsequent valuation remains uncertain. It is yet to be determined whether existing shareholders will have opportunities to liquidate their investments through secondary transactions.
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