Rising prevelance of redemption rights provisions
.jpg)
The prevalence of redemption rights provisions in equity financings has been trending upward.
In the first three quarters of this year, 4% of early-stage deals and 9% of late-stage deals included redemption rights provisions, compared to 3% and 8%, respectively, in 2023.
This provision has fluctuated most in late-stage deals, where its current usage is significantly above the five-year low of 7% observed in 2021.
For context, redemption rights allow investors to require the company to repurchase their shares after a set period, typically when an IPO or acquisition has not occurred. The increasing use of this protective mechanism may indicate heightened investor caution, particularly around exit opportunities.
The growing prevalence of redemption rights in late-stage deals aligns with other metrics showing that deal structures are becoming more protective at this stage. We’ve also reported a rise in atypical liquidation preferences in Series C+ rounds and an increase in pay-to-play provisions across various parts of the market.
.png)
The five-year low in late-stage redemption rights coincided with the venture market’s peak in 2021. Interestingly, redemption rights were relatively common in both early- and late-stage deals in 2019 and 2020, years when the venture market was active. However, concerns about public listings were growing in 2019 due several high profile IPO failures, and the onset of COVID-19 in 2020.
Want more data like this? Explore our Market Insights offering.
©2023 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC.
This material is not the product of J.P. Morgan’s Research Department. It is not a research report and is not intended as such. This material is provided for informational purposes only and is subject to change without notice. It is not intended as research, a recommendation, advice, offer or solicitation to buy or sell any financial product or service, or to be used in any way for evaluating the merits of participating in any transaction. Please consult your own advisors regarding legal, tax, accounting or any other aspects including suitability implications, for your particular circumstances or transactions. J.P. Morgan and its third-party suppliers disclaim any responsibility or liability whatsoever for the quality, fitness for a particular purpose, non-infringement, accuracy, currency or completeness of the information herein, and for any reliance on, or use of this material in any way. Any information or analysis in this material purporting to convey, summarize, or otherwise rely on data may be based on a sample or normalized set thereof. This material is provided on a confidential basis and may not be reproduced, redistributed or transmitted, in whole or in part, without the prior written consent of J.P. Morgan. Any unauthorized use is strictly prohibited. Any product names, company names and logos mentioned or included herein are trademarks or registered trademarks of their respective owners.
Aumni, Inc. (“Aumni”) is a wholly-owned subsidiary of JPMorgan Chase & Co. Access to the Aumni platform is subject to execution of an applicable platform agreement and order form and access will be granted by J.P. Morgan in its sole discretion. J.P. Morgan is the global brand name for JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide. Aumni does not provide any accounting, regulatory, tax, insurance, investment, or legal advice. The recipient of any information provided by Aumni must make an independent assessment of any legal, credit, tax, insurance, regulatory and accounting issues with its own professional advisors in the context of its particular circumstances. Aumni is neither a broker-dealer nor a member of any exchanges or self-regulatory organizations.
383 Madison Ave, New York, NY 10017
