✒ Apeira is creating “venture synthetics” and plan to allocate 30% of its capital betting against overpriced start-ups.
This product doesn’t require company’s approval to be created because Apeira is not actually buying or selling the underlying stocks. It is simply an instrument where people are taking opposite sides of an outcome, which can be a definable triggering event such as an IPO, M&A, or valuation of shares hitting a specific price.
Simply put, this synthetic instrument represents a counterparty-based transaction in which Apeira would take the short side of the bet and it would find buyers on the long side. This is bringing a hedge fund form of long-short investing to venture capital start-ups.
Whether entrepreneurs and VCs would react positively to this invention remains to be seen. A diplomatic justification by Apeira:
“Our shorts are not about the value of the company but the capital structure that caused them to be inefficiently priced. It’s a bet on the pricing valuation opportunity versus betting against the companies.”