Original Article Title: Can Tokenized Pre-IPO Stocks Break Barriers in the Private Equity Market?

Original Article Source: Tiger Research

Original Article Translation: AididiaoJP, Foresight News

Abstract

· Despite offering high returns, the private equity market remains primarily accessible to institutional investors and high-net-worth individuals, making it challenging for retail investors to participate.

· Tokenization can address the limitations of the traditional financial system in terms of liquidity, accessibility, and convenience, but it still faces significant legal and technical barriers.

· Projects like Ventuals, Jarsy, and PreStocks are exploring various approaches to tokenizing private equity. While these efforts are still in early stages, they have shown potential in reducing market structural barriers.

Private Equity: Highly Attractive But Inaccessible to Retail Investors

How can the average person invest in SpaceX or OpenAI? As private companies, they are largely out of reach for most investors. The opportunity for retail investors to participate is almost non-existent, as investment opportunities typically only arise after a company goes public.

At the core of the issue is the exclusion of retail investors from the high returns generated in the private equity market. The value created in the private equity market over the past 25 years is estimated to be three times that of the public markets.

This structural barrier stems from two core factors. Firstly, the fundraising process for private companies is highly selective, with transactions usually only open to well-known institutional investors regardless of investor qualifications. Secondly, the growth of the private capital market has provided more funding options for companies, with many now raising billions of dollars without going public.

OpenAI serves as a typical example of these dynamics. In October 2024, it raised $6.6 billion from major investors such as Thrive Capital, Microsoft, NVIDIA, and SoftBank. By March 2025, it raised an additional $40 billion in a funding round led by SoftBank, with Microsoft, Coatue, and Altimeter participating, making it the largest private fundraising in history.

This phenomenon reveals a reality: only a few institutional investors can participate in the private equity market, and a mature private capital infrastructure provides these companies with financing options beyond going public.

Therefore, today's investment environment is becoming increasingly closed, exacerbating the inequality in the distribution of high-growth opportunities.

Can Equal Access and Tokenization Solve Structural Barriers?

Can tokenization truly address the structural inequality in the private equity market?

At first glance, this model seems quite attractive: real-world assets are converted into digital tokens, enabling fractional ownership and supporting round-the-clock trading in the global market. However, fundamentally, tokenization merely repackages existing assets like Pre-IPO equity into a new form. Solutions to improve accessibility already exist in traditional finance.

Source: ustockplus

For example, platforms like Dunamu's Ustockplus in Korea, and Forge and EquityZen in the U.S., allow retail investors to trade private equity within existing regulatory frameworks.

So, what is unique about tokenization?

The key lies in market structure. Traditional platforms utilize a peer-to-peer (P2P) matching model where buyers must wait for sellers to place orders. If there is no counterparty, the trade cannot be completed. This model suffers from low liquidity, limited price discovery, and unpredictable execution times.

Tokenization is expected to address these structural limitations. If tokenized assets are listed on centralized exchanges (CEX) or decentralized exchanges (DEX), liquidity pools or market makers can provide continuous counterparties, thereby enhancing execution efficiency and price accuracy. Apart from reducing friction, this approach can also redefine market architecture.

Furthermore, tokenization can achieve functions that the traditional financial system cannot support. Smart contracts can automatically allocate dividends, execute conditional trades, or enable programmable governance rights. These functionalities facilitate the emergence of new financial instruments that are designed for flexibility and transparency.

Projects Attempting to Tokenize Pre-IPO Equity

Ventuals

Source: Ventuals

Built by Ventuals is a perpetual contract structure. Its core advantage lies in the ability to trade derivatives without holding the underlying asset. This allows the platform to quickly onboard a large number of Pre-IPO stocks while avoiding typical regulatory requirements such as identity verification or accredited investor certification.

The perpetual contract is implemented through Hyperliquid's HIP-3 standard. However, this standard is currently only running on the testnet, and Ventuals is still in the pre-launch stage.

Its pricing model is also unconventional; the token price is not based on the stock price or actual market trades but is calculated by dividing the company's total valuation by 1 billion. For example, if OpenAI's valuation is $350 billion, then the price of 1 vOAI token would be $350.

This low-barrier model also presents structural challenges, with the most prominent being the reliance on oracles. Valuation data of private companies itself is opaque and has a low update frequency. Derivatives based on such incomplete information may exacerbate market information asymmetry.

Jarsy

Source: Jarsy

Jarsy adopts a tokenization model backed by a 1:1 asset. Its core mechanism is the direct acquisition of Pre-IPO stocks, issuing one token for every share held. For example, if Jarsy holds 1000 shares of SpaceX stock, it will mint 1000 JSPAX tokens. While investors do not directly hold the underlying stock, they enjoy all related economic rights, including dividends and stock price appreciation.

Source: Jarsy

This model relies on Jarsy's role as an asset management entity. The platform first gauges investor demand through presale token offerings, then uses the raised funds to purchase actual stocks. If the purchase is successful, presale tokens convert into official tokens; otherwise, funds are refunded. All assets are held by a special purpose vehicle (SPV) and real-time validation is provided through a reserve proof page.

The platform also significantly lowers the investment threshold, with a minimum investment amount of only $10. For investors outside the U.S., there are no accreditation requirements, thereby expanding global access. All transaction records and asset holdings are stored on-chain, ensuring auditability and transparency.

However, this model has structural limitations. The most pressing issue is liquidity, stemming from the platform's limited holdings of each company's assets. For example, Jarsy currently holds X.AI, Circle, and SpaceX stocks with total values of approximately $350,000, $490,000, and $670,000, respectively. In this low-liquidity market, even small sell orders from large holders could trigger significant price fluctuations. Due to the opaque and illiquid nature of private equity itself, price discovery is particularly challenging, further exacerbating volatility.

Furthermore, while the asset-backed model provides stability, it hinders scalability. The issuance of each new token requires the actual purchase of stocks, a process that involves negotiation, regulatory coordination, and potential procurement delays, impeding the platform's ability to respond to rapidly changing market trends.

Nevertheless, despite these challenges, Jarsy is still in its early stages, having launched just over a year ago. As the user base and assets under management (AUM) grow, liquidity issues may gradually be alleviated. With the platform's expansion, wider coverage and a deeper tokenized equity pool may naturally bring about a more stable and efficient market.

PreStocks

Source: PreStock

PreStocks adopts a model similar to Jarsy's, purchasing private company stocks and issuing asset-backed tokens at a 1:1 ratio. The platform currently supports trading for 22 pre-IPO stocks and has opened its products to the public.

PreStocks is built on the Solana blockchain and facilitates trading through integrations with Jupiter and Meteora. It offers 24/7 trading and instant settlement, without charging management fees. There is no minimum investment requirement, allowing anyone with a Solana-compatible wallet to participate, further lowering the entry barrier.

However, the platform also faces some restrictions, as users from the U.S. and other major jurisdictions are unable to access it. Although all tokens are claimed to be fully collateralized by the underlying stocks, PreStocks has not yet publicly disclosed detailed holdings verification documents. The team has stated that they will regularly release external audit reports and can provide fee-based individual verification services upon request.

Compared to Jarsy, PreStocks has a closer integration with decentralized exchanges (DEXs), which may support broader secondary use cases such as token lending. Within the Solana ecosystem, tokenized public stocks (e.g., xStock) are already actively used, and PreStocks may benefit from ecosystem-level synergies.

Unsolved Challenges of Pre-IPO Stock Tokenization

The tokenization of the stock market is still in its early stages. While platforms like Ventuals, Jarsy, and PreStocks have shown early development momentum, significant structural challenges remain.

First and foremost, regulatory uncertainty is the most fundamental obstacle. Most jurisdictions still lack a clear legal framework for tokenized securities. As a result, many platforms operate in regulatory gray areas, engaging in regulatory arbitrage actively without direct compliance.

Secondly, resistance from private companies remains a key barrier. In June 2025, Robinhood announced a new service for EU customers, offering exposure to tokenized investments in companies like OpenAI and SpaceX. OpenAI immediately expressed opposition, stating, "These tokens do not represent ownership in OpenAI, and we have no relationship with Robinhood." This response highlights private companies' unwillingness to relinquish control over their ownership structure and investor management, a core function they tightly guard.

Thirdly, the complexity of technology and operations cannot be ignored. Maintaining a reliable link between real-world assets and tokens, addressing cross-border compliance issues, dealing with tax implications, and enforcing shareholder rights are all non-trivial challenges. These issues could severely limit user experience and scalability.

Despite these limitations, market participants are actively seeking solutions. For example, Robinhood has stated its plans to expand its tokenized product to thousands of assets by the end of the year, despite facing significant challenges in the public market. Platforms like Ventuals, Jarsy, and PreStocks are also pushing forward with differentiated approaches to tokenized equity access.

In conclusion, tokenization has provided a promising path to improve access to private equity markets, but this field is still in its nascent stage. Current limitations are real, but the history of the crypto space shows that technological breakthroughs and rapid market adaptation can, and often do, redefine possibilities.

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