Nasdaq has partnered with several major banks to create Nasdaq Private Market, an independent company that will facilitate secondary trading of private securities. As the market for initial public offerings has slowed, largely due to excessive costs and compliance requirements, more and more companies are looking to stay private. For first-time shareholders, this can create a liquidity problem, as investors usually want to cash out their investment at some point in the future.
Recognizing this reality, the Nasdaq has formed a joint venture with SVB Financial Group (parent company of Silicon Valley Bank), Citi, Goldman Sachs, and Morgan stanley to launch an institutional grade secondary trading market. The platform will receive strategic investments from SVB, Citi, Goldman Sachs and Morgan Stanley.
The Nasdaq says existing technology, customer relationships and regulatory infrastructure will provide a solid foundation for the joint venture. Private companies, brokers and investors will be able to access, connect, manage and execute their private company equity trades through a global marketplace and customized technology solutions. The platform will offer structures to manage and support transactions of shares of private companies, including take-over bids, auction programs, block trades and ongoing trades.
The list of features is similar to other institutional trading platforms, including end-to-end settlement process management and a global inter-broker market alongside its existing alternative trading system. The relationships established should alleviate liquidity problems to some extent, as private markets tend to create wider spreads on offers.
Nelson griggs, Chairman of the Nasdaq Stock Exchange, said that since launching the Nasdaq Private Market in 2014, they have built a strong track record and a strong pipeline of secondary transactions:
“This joint venture will accelerate our opportunities in the private aftermarket market and set the standard for technology-driven operational efficiency, compliance and execution. “
Eric Folkemer, president of Nasdaq Private Market, added that private markets are more diverse than ever:
“Using the scale and distribution of our joint venture partners along with our experience in cutting edge technology and markets, Nasdaq Private Market will become the go-to market that connects and manages the needs of the entire ecosystem. private through a single platform. “
Greg becker, CEO of SVB, noted that innovative companies stay private longer and their needs must be a means of generating cash:
“Together with the Nasdaq and this impressive consortium of leading banks, we are establishing a secondary trading platform for private company stocks that will provide our clients with a path to employee retention in an environment where access to talent is one of the biggest challenges. “
Typically, most private companies issue securities under Reg D, a securities exemption that is only available to qualified investors. Some industry watchers have noted that as successful start-ups stay private, the longer most of the returns go to investors who are already wealthy. Some insiders believe that policymakers should democratize the definition of a qualified investor to allow anyone in the know to participate in private equity offerings. If this happens, more of the population will have access to this asset class. Otherwise, the vast majority of the population will remain disenfranchised.
Nasdaq Private Market currently reports relationships with more than 250 private companies around the world, facilitating 477 private company transactions serving 59,000 shareholders and a transaction volume of more than $ 30 billion.