Pre-IPO Perpetual Futures FAQ

An IPO, or Initial Public Offering, is the process by which a private company sells shares to the general public for the first time and lists them on a stock exchange such as the NYSE or NASDAQ. Before an IPO, a company's shares are typically held by founders, employees, and private investors and cannot be freely bought or sold by the public. The IPO is the moment a company transitions from private to public ownership.

Pre-IPO perpetual markets are cash-settled derivative contracts that allow traders to take long or short positions on the valuation of a private company before it has listed on a public stock exchange. They are "perpetual" because they have no expiry date, positions can be held indefinitely, subject to margin requirements.

On Kraken, current examples include perpetual contracts on Anthropic (PF_ANTHROPICXUSD) and OpenAI (PF_OPENAIXUSD), both offering up to 5x leverage. These contracts let you:

• Go long if you expect the company's valuation to rise ahead of or beyond a public listing.
• Go short to hedge or take the opposite view.

Pre-IPO perpetuals are purely financial instruments. They are not shares, IPO allocations, tokenised equity, or any other claim on the underlying company.

Neither. A pre-IPO perpetual is a cash-settled derivative, it does not represent ownership of any kind. Holding a position gives you no equity stake, no voting rights, no entitlement to dividends, and no allocation in the IPO itself.

What you are doing is taking a financial position, long or short, on the company's implied valuation. All profits and losses are settled in cash (USD). The contract is, in the words of Kraken's own documentation, "not shares, IPO allocations, tokenised equity, or claims on the issuer."

Because there is no listed stock price to reference, pre-IPO perpetuals use a purpose-built synthetic index. On Kraken, this is called the Kraken PreMarket Synthetic index, which derives the reference price from the contract's own order book rather than an external feed.

Key features of how the index works:

• Synthetic pricing: The index is built from the contract's own market activity since there are no available external price references.
• Exponential smoothing: The index is smoothed so that short-lived spikes in a thin order book have little effect on the reference price. Price discovery is intentionally measured.
• Mark-price clamp: The contract's mark price is held within ±0.25% of the synthetic index at all times. This band is designed to prevent momentary spikes from triggering forced liquidations, a brief shock moves the mark only slightly, while sustained moves are followed in an orderly way.

When the company completes its IPO, Kraken intends to transition the pre-IPO perpetual to a standard stock perpetual future. Specifically, pricing moves from the Kraken PreMarket Synthetic index to the company's xStocks tokenised equity spot index, with normal funding mechanics applying from that point.

The conversion process is designed to be P&L-neutral:

• Once the final IPO is filed, disclosing the offer price and total share count, the contract is rebased from valuation units into standard per-share terms via an adjustment similar to a stock split.
• Any unrealised PnL from before the conversion is crystallised into your account balance, and the position is reopened at the adjusted mark price with unrealised PnL resetting to zero.
• When the public stock begins trading, pricing bridges smoothly into live equity prices.

Contract specifications, including initial margin, maintenance margin, position limits, and funding rates, are expected to change at the point of conversion. Kraken will publish full details and timing ahead of any changes.

Important caveats: The actual IPO price, share count, and timing are all uncertain until the filing is made. If the IPO does not proceed, or a reliable index price becomes unavailable, Kraken reserves the right to delist the contract and settle it at a value determined in accordance with its rules. Significant price gaps between the pre-IPO valuation and the IPO offer price are possible, and leveraged positions may experience large P&L swings around IPO events.