Nasdaq to launch pre-IPO stock market in deal with banks

Pre-IPO stock trading has intensified in recent years as startups waited longer to go public. Employees of these companies are often looking to get money out of their stocks, while investors may want to get into a fast-growing tech startup.

As part of the deal, which is due to be announced on Tuesday, Nasdaq Private Market will be transferred to a separate and stand-alone company that will receive investments from a group of banks. The group includes Citigroup Inc.,

Goldman, Morgan Stanley and SVB Financial Group,

SIVB 0.47%

owner of Silicon Valley Bank.

Terms of the transaction were not disclosed. The Nasdaq said it would remain the largest shareholder in the joint venture.

Most individual investors cannot buy stocks on the Nasdaq Private Market or other markets for pre-IPO stocks. Under current regulations, such transactions are generally limited to accredited investors – that is, people who meet certain criteria for wealth, such as having a net worth of over $ 1 million, out of home. , or an annual income greater than $ 200,000.

Nonetheless, a number of rival trading platforms have sprung up to bring together buyers and sellers of private company shares. These include Carta, ClearList, EquityZen Inc. and Forge Global Inc.

The Nasdaq is betting that the banking deal will make the Nasdaq Private Market the dominant venue for pre-IPO stock trading. Its banking partners include some of Silicon Valley’s biggest negotiators, with clients that encompass both startups and high-net-worth investors.

“The banks we work with will bring massive distribution,” said Nelson Griggs, executive vice president of Nasdaq.

The Nasdaq says its private market platform is already the main venue for private business tenders. In such transactions, holders of shares of private companies are allowed to sell them within a specified period of time, usually to a large investor or to the company itself.

Cryptocurrency exchange operator Coinbase Global Inc. and cloud software provider Asana Inc.

are among the companies that used the Nasdaq Private Market prior to their IPOs.

In the first six months of 2021, the Nasdaq Private Market facilitated a record 57 secondary transactions from private companies, according to the exchange operator. The platform processed $ 4.6 billion in total transaction value during the period, the highest level in three years, the Nasdaq said.

The Nasdaq said its technology and expertise in managing markets could help improve the experience of trading pre-IPO stocks.

Many existing sites for pre-IPO stocks have limited volumes, high fees, and wide spreads between the buying and selling prices of stocks. Due to the administrative requirements associated with private securities transactions, it can take weeks for a transaction concluded on some of these platforms to result in the actual delivery of the shares.

Nasdaq Private Market was established in 2013 as a joint venture between Nasdaq and SharesPost, an online marketplace for pre-IPO stock trading. In 2015, Nasdaq acquired SecondMarket Solutions Inc., a competitor in the field, and integrated it into the company.

Write to Alexandre Osipovich at [email protected]