Alternative Investments: ‘Nasdaq Private Market’ To Be Spun Out As New Venue For Private Company Stocks

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SVB Financial Group, Citi, Goldman Sachs, and Morgan Stanley will invest in the new company.

Issuers, brokers, shareholders and prospective investors of private company stock will soon be able to deal on a new platform to be set up as a partnership between Nasdaq (NASDAQ: NDAQ), SVB Financial Group (NASDAQ: SIVB), Citi (NYSE: C), Goldman Sachs (NYSE: GS), and Morgan Stanley (NYSE: MS). Nasdaq’s existing “Nasdaq Private Market,” which was launched in 2014, will be spun off and contributed to this new JV between Nasdaq and the Wall Street financial giants. (Intrado GlobeNewsWire)

Nasdaq would be the largest shareholder in the venture.

Rationale

The move addresses the rising tendency for startups and private businesses to remain private rather than go for public listing, and raising funds instead from venture capitalists and private equity firms.

Employees and stakeholders at such firms could choose to exit their holdings on this new platform; on the other hand, more investors (other than just privileged ones) could get a foot in the door into hot startups at an early stage of their lives.

It would also allow for more transactions volume than at the existing Nasdaq Private Market venue. The latter could possibly become the dominant venue for trading IPO-destined stocks.

The existing mechanisms for private company shares suffer from thin volumes (and therefore poor liquidity), high fees and wide spreads, according to the Wall Street Journal, which first reported the deal.

Furthermore, the time for full fructification and final settlement for a transaction in current systems can be as long as a few weeks.

New Platform for Trading Private Company Stock

The new platform is expected to be an institutional-grade, centralized secondary trading venue that will have a global reach and technology solutions designed for private company stock transactions.

The transactions permissible on the exchange include tender offers, buyside book-building, auctions, investor block trades, company directed windows of liquidity and pre-direct listing continuous trading.

The platform will also feature an end-to-end settlement process and qualified brokers’ transactions through its existing alternative trading system.

“Innovation companies are staying private longer and need the ability to offer their employees a safe and easy way to generate liquidity while they are building their businesses,” said Greg Becker, CEO of SVB Financial Group, parent company of Silicon Valley Bank. “Together with Nasdaq and this impressive consortium of leading banks, we are establishing a secondary trading venue for private company stock that will offer our clients a path to employee retention in an environment where access to talent is one of the biggest challenges.”

“Nasdaq Private Market will become the go-to marketplace that connects and manages the need of the entire private ecosystem through one platform,” said Eric Folkemer, President, Nasdaq Private Market.

Related Story:  iSTOX Scores $50M In Series A Round To Democratize PE Investing

Image credit: Flickr                                                   

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