Nasdaq to spin out exchange for private businesses in deal with banks

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I’m assuming participation will require qualified investor status. Perhaps there are legal changes in the pipeline. I definitely agree that there is little reason any longer to use an initial public offering as a serious fundraising source, and is generally, simply used as an exit strategy for the actual primary markets of venture capital.


Nasdaq is to separate its platform for share dealing in private companies in move that will see the exchange partner with SVB Financial, Citigroup, Goldman Sachs and Morgan Stanley in a bid it hopes will boost dealmaking activity. Nasdaq Private Market has grown rapidly since it was formed in 2013, mirroring the expanding size of non-listed companies. A total of 57 private companies turned to the platform to facilitate transactions in the first six months of this year, completing tender offers for employees and shareholders as well as facilitating trades with institutional investors, according to a person briefed on the matter. Transaction volumes on the Nasdaq Private Market hit $4.6bn in the first half of 2021, more than the whole of last year. The cryptocurrency exchange Coinbase and Strava, the fitness data tracker, are among the businesses that have turned to Nasdaq’s private market. Nasdaq said on Tuesday that the venture would “develop a full suite of liquidity solutions for private companies”. The company, which will retain the largest stake in the new joint venture, did not disclose the financial terms of the deal. Eric Folkemer, the president of Nasdaq Private Market, added that the growth of so-called unicorns meant there was ample room for the business to expand, noting that the “secondary market has a long way to go in terms of providing efficient tools” for investors and companies. “There is an expectation in the market that access should be equal and fair and transparent,” he said. “Today it is a highly brokered market and so investors and employees are not always treated equally.”


What will the disclosure requirements be to list on this venture exchange?


The stock market will see increased long-term growth from news like this. Private equities will have better infrastructure to go public and liquidity for early investors as they raise private rounds. With regulations opening up startup investing to your average Joe (Jumpstart Our Business Startups (JOBS) Act) will be able to capture early round equity and have a route to sell as the company grows. Historically, private company equity is illiquid and investors have trouble accessing that value. This is another important piece of infrastructure for the US economy.