Can Pre-IPO Stock Tokenization Address Challenges in the Private Equity Market?

This report, compiled by Tiger Research, discusses how tokenization lowers investment barriers in the pre-IPO equity market through case studies of Ventuals, Jarsy, and PreStocks.

TL;DR

• Despite offering high returns, the private equity market remains largely inaccessible to retail investors, with a bias favoring institutions and high-net-worth individuals.

• Tokenization has the potential to overcome the limitations of the traditional financial system, particularly in terms of liquidity, access, and convenience, but significant legal and technical barriers remain.

• Projects like Ventures, Zoshi, and FreeStock are exploring different approaches to tokenizing private equity assets. While still in their early stages, these efforts show potential to reduce structural barriers in the market.

1. The Allure of Private Equity — But It's Not for You

How can someone invest in SpaceX or OpenAI? As private companies, both are closed to most investors. Retail access is virtually non-existent, and investment opportunities typically only emerge after the IPO.

The main problem is the exclusion of the potential for substantial profits generated in private markets. Over the past 25 years, private markets have created about three times more value than public markets.

Two structural factors explain this. First, capital fundraising is a highly sensitive process for private companies. Regardless of investor qualifications, deals are typically awarded to well-known institutional investors. Second, the growth of private capital markets has expanded financing options. Many companies can now raise billions of dollars without going public.

OpenAI is a prime example of both dynamics. In October 2024, the company raised $6.6 billion from major investors including Thrive Capital, Microsoft, Nvidia, and SoftBank. In March 2025, OpenAI secured an additional $40 billion in the largest private funding round in history, led by SoftBank with participation from Microsoft, Coatue, and Altimeter.

This describes a system where only a select group of institutional investors gain access, while a mature private capital infrastructure provides companies with an alternative to a public listing.

Thus, the current investment landscape is increasingly exclusive, deepening inequalities in access to high-growth opportunities.

2. Equal Access: Can Tokenization Address Structural Challenges?

Could tokenization be a real solution to the structural imbalances in the private equity market ?

At first glance, this model may seem appealing: real-world assets are converted into digital tokens, enabling fractional ownership and facilitating 24/7 trading on global markets. But at its core, tokenization simply repackages existing assets, such as pre-IPO shares, into a new format. Solutions to increase access already exist within the traditional financial system.

For example, platforms like Dunamu's Ustockplus in Korea, and Forge or EquityZen in the US, allow retail investors to access private stocks within an existing regulatory framework.

So, what makes it different from tokenization?

The main difference lies in the market structure. Traditional platforms operate on a peer-to-peer (P2P) matching system, requiring buyers to respond to sell orders, and without a counterparty, transactions cannot be completed. This model suffers from low liquidity, limited price discovery, and uncertain execution times.

Tokenization has the potential to address these structural constraints. If an asset is tokenized and listed on a CEX or DEX, a liquidity pool or market maker can provide a continuous counterparty, improving execution and price efficiency. Beyond simply reducing friction, this approach transforms the market architecture itself.

Furthermore, tokenization enables financial features not possible in traditional systems. Smart contracts can automate dividends, implement conditional trading, or enable programmable governance rights. These functions open up the possibility of creating new financial instruments that are both flexible and transparent from the outset.

3. Projects Attempting to Tokenize Pre-IPO Stocks

3.1. Ventuals

Ventuals is built on a perpetual futures structure . Its primary advantage is that it allows derivatives trading without requiring direct ownership of the underlying asset. This allows the platform to quickly list a wide range of pre-IPO shares while bypassing common regulatory requirements such as identity verification or accredited investor status.

This perpetual futures product is implemented using Hyperliquid's HIP-3 standard. However, this standard is currently only operational on the testnet , and Ventuals itself is still in the pre-launch stage.

The pricing model is also unusual. Instead of using stock prices or actual market transactions, the token price is calculated by dividing the company's total valuation by one billion. For example, if OpenAI is valued at $35 billion, then one vOAI token would cost $350.

However, this ease of access brings structural challenges, particularly the reliance on oracles . Valuation data for private companies is inherently closed and updated irregularly. Derivatives based on such incomplete information can exacerbate information asymmetries in the market.

3.2. Jarsy

Jarsy uses an asset-based tokenization model with a 1:1 ratio. The primary mechanism involves the direct acquisition of pre-IPO shares and the issuance of one token for each share held. For example, if Jarsy owns 1,000 SpaceX shares, it will mint 1,000 JSPAX tokens. Although investors don't directly hold the underlying shares, they retain all associated economic rights, including dividends and price appreciation.

This model is possible because Jarsy acts as an asset management entity. The platform first gauges investor interest through a token pre-sale , then uses the raised capital to purchase actual shares. If the purchase is successful, the pre-sale tokens are converted into the official token; if not, the funds are returned. All assets are held in SPVs, and real-time verification is available through the Proof of Reserve page.

The platform also significantly lowers the barrier to entry, with a minimum investment of just USD 10. There are no accreditation requirements for investors outside the US, expanding global accessibility. All transaction records and asset ownership are stored on-chain , ensuring traceability and transparency.

However, this model faces structural limitations. The most pressing issue is liquidity, stemming from the limited scale of asset holdings per company. For example, Jarsy's current holdings include approximately USD 350,000 for X.AI, USD 490,000 for Circle, and USD 670,000 for SpaceX. In such a thin market, even a small sell order from a large holder can trigger significant price fluctuations. Given the opaque and illiquid nature of the private equity market, price discovery is also inherently difficult, further exacerbating volatility.

Furthermore, while asset-based tokenization offers stability, it limits scalability. Each new token offering requires the acquisition of actual shares, a process that involves negotiation, regulatory coordination, and potential procurement delays. This hampers the platform's ability to respond to fast-moving market trends.

However, Jarsy is still in its early stages, having only launched a little over a year ago. With a growing user base and increasing AUM, liquidity issues may ease over time. As the platform grows, broader coverage and greater liquidity depth in tokenized equities could naturally create a more stable and efficient market.

3.3. PreStocks

PreStocks adopts a similar model to Jarsy, purchasing shares in private companies and issuing tokens backed by 1:1 assets. The platform currently supports trading in 22 pre-IPO stocks and recently launched its product to the public.

Built on the Solana blockchain, PreStocks enables trading through integrations with Jupiter and Meteora. The platform offers 24/7 trading with instant settlement, with no management or performance fees. There is no minimum investment requirement, and anyone with a Solana-compatible wallet can participate, lowering the barrier to entry.

However, there are some limitations. The platform is not accessible to users in the US and other major jurisdictions. Although all tokens are touted as fully backed by the underlying stocks, PreStocks has not publicly disclosed detailed documentation to verify each of its positions. The team has stated that it will periodically publish external audit reports and, upon request, provide individual verification for a fee.

Compared to Jarsy, PreStocks is more tightly integrated with decentralized exchanges (DEXs), which could enable more secondary use cases, such as token-based lending. Within the Solana ecosystem, where tokenized public equities (e.g., xStock) are already actively used, PreStocks may benefit from ecosystem-level synergies.

4. Unresolved Challenges in Pre-IPO Stock Tokenization

The market for tokenized equity is beginning to take shape. While platforms like Ventuals, Jarsy, and PreStocks are showing early momentum, significant structural challenges remain.

First, regulatory uncertainty is the most fundamental obstacle.

Most regions still lack a clear legal framework for tokenized securities. As a result, many platforms operate in a grey area, exploiting jurisdictional arbitrage to remain active without direct compliance.

Second, resistance from private companies remains a critical obstacle.

In June 2025, Robinhood announced a new service offering tokenized exposure to companies like OpenAI and SpaceX for customers in the European Union. OpenAI immediately issued a public denial, stating: “These tokens do not represent ownership in OpenAI, and we have no partnership with Robinhood.”

This response highlights the reluctance of private companies to relinquish control of cap tables and investor management as essential functions they closely guard.

Third, technical and operational complexity cannot be ignored.

Maintaining reliable connectivity between real-world assets and tokens, navigating cross-border compliance, addressing tax implications, and enabling the enforcement of shareholder rights are non-trivial challenges. These issues can seriously limit user experience and scalability.

Despite these limitations, market participants continue to find solutions. Robinhood, for example, has announced its intention to expand its token offering to thousands of assets by the end of the year, despite public criticism. Platforms like Ventuals, Jarsy, and PreStocks are also moving forward with different approaches to tokenizing access to equities.

In short, tokenization offers a promising path to increasing access to private equity , but the space is still in its infancy. Current limitations are real, but history in the crypto world shows that technological breakthroughs and rapid market adaptation can and often do succeed, redefining what's possible.

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