Fort Capital Q4 Market Update
One of the challenges of writing a quarterly market letter is deciding what to write about at all. So much happens in a 90-day period that it can feel almost arbitrary to settle on a single topic – especially true over this past month. Our conversations have ranged from global markets and Davos speeches to the valuation of precious metals vs. cryptocurrencies, central bank leadership, dramatic international and domestic geopolitics, and continuing debates around the promise and risk of artificial intelligence. At times, our focus seemed to change almost daily.
That process is a useful reminder of what Fort Capital is not. We are not in the prediction game, and thankfully so. Markets have a long history of humbling even the most confident forecasters, and short-term narratives often fade well before their implications become clear.
Instead, we have chosen to focus on a continuing influence that cuts across markets and cycles, quietly shaping pricing and outcomes over time: liquidity.
|
|
|||||||||||||||
The consequences are most visible in public markets.
Many small-cap companies are thinly traded, lightly followed, and valued in ways that do not fully reflect business quality. In some cases, valuation gaps help drive M&A activity. In others, they raise a more fundamental question about the ongoing value of being public when there is abundant private capital available. This dynamic has been examined in a recent report co-authored by our partner, Ben Cherniavsky, for the Fraser Institute on Canada’s shrinking stock market and its broader implications. The report touches on the growing disparities in public market participation and valuation. Readers interested in Ben’s thoughts can read more in our full newsletter.
At the same time, private markets have continued to expand.
For most businesses, staying private longer, even indefinitely, is now a realistic option. Outside of the very largest global enterprises, capital pools do not require daily price discovery. Capital can be aligned with longer time horizons, and value assessed more directly on fundamentals rather than marginal trading. Investors are prepared to play the long game, and future liquidity can be found while staying private.
Investors with permanent or patient capital, including family offices and sovereign wealth funds, are structurally advantaged in this environment. Without near-term liquidity requirements, they can “get paid” for illiquidity, and benefit from assets whose value unfolds over time. Where liquidity expectations and capital structures are mismatched, volatility can surface quickly; this is a dynamic we see today in areas such as real estate and private credit.
A final observation is worth emphasizing. The “marginal” (or last) trade of a public security is often seen as a proxy for “fair value,” and comparison with other securities… but it rarely reflects the value of the business as a whole. Public prices already embed a minority position discount, however the last trade is often set by a relatively small volume of capital reacting to short-term factors. It is a price of liquidity, not necessarily a measure of underlying worth.
Price is not value
This distinction matters. Fundamental valuation – the kind that underpins M&A transactions and private market financing – is based on en bloc ownership, control considerations, cash flows, and long-term prospects, not marginal trading dynamics. Remembering the difference between price and value is increasingly important in markets shaped as much by liquidity as by fundamentals.
For owners and boards, liquidity is not an abstract concept; it is a practical consideration that influences strategy, timing, and outcomes. In both M&A and capital-raising discussions, we see how differing liquidity expectations between buyers, sellers, and capital providers shape decisions alongside operating performance.
In transaction markets, buyers increasingly focus on certainty as much as price. Processes that reduce execution risk, shorten timelines, or clarify governance and exit pathways are often rewarded, sometimes more than incremental improvements in headline valuation. Conversely, uncertainty around structure or timing can weigh on outcomes even when fundamentals are strong.
Similar considerations apply to growth capital. Companies are weighing not just how much capital to raise, but the form it takes, the time horizon of investors, and the flexibility preserved for the business. In many cases, owners are consciously trading immediate liquidity and value for longer-term optionality and governance, particularly where patient capital is available.
Enough for now…but more later
Liquidity is not a quarterly topic, nor does it lend itself to simple conclusions. Its influence evolves across cycles and market structures, and is often most visible during periods of change. While we have used it here as a framing lens, it is a subject we expect to explore further outside the attention span of a quarterly letter. Thank you for getting this far.
Our focus at Fort Capital remains on helping owners and boards navigate these considerations with clarity and pragmatism, grounded in real-world transaction experience rather than short-term market narratives.
A Fun February Fact
This February is a “perfect month”: 28 days, starting on a Sunday, dividing neatly into four full weeks. A full calendar, four rows all with a date. It feels orderly, which is precisely why it’s less common than you might expect.
The culprit is the leap year. A normal year shifts the calendar forward by one weekday; a leap year shifts it by two. Those extra days prevent the calendar from repeating cleanly, so perfect Februaries don’t recur on a fixed schedule. Instead, the gaps tend to be 6, 11, or 17 years, averaging out to roughly once every 11 years.
In short: enjoy this one. The next perfect February won’t arrive until 2037.
Let’s hope the symmetry extends to year-end reporting as well, with constructive results that help support investor confidence in the months ahead.
Click here to read the full 2025 Q4 Newsletter with more market updates, transaction news and more.