Saturday, April 25, 2009
The buzz about the emergence of specialist exchanges for private company stock is getting louder. There are many views about how to soften or even resolve the current credit crisis by creating an alternative to the public markets for small, private companies. As an example in US, SharesPost ( https://www.sharespost.com/comingsoon ) exchange is about to start operations and scheduled to start trading in September is Xchange ( http://www.xchanged.com/ ), which will rival other, similar models backed by VC’s. One of the issues I struggle with here is how much information these private companies, will be willing to share and present through these public electronic exchanges?
The idea behind private stock exchanges is to allow private companies to raise capital and create a way for their owners and stock holders to cash out, without the additional burden, expense, delay or scrutiny of the publicly traded stocks by registering company shares or taking on reporting and other compliance responsibilities. In the past these type of private exchange was limited to a handful of players like The Goldman Sachs exchange which is private and not available to individual investors. The TGS exchange is available only to institutional and other qualified ‘sophisticated’ investors.
Regardless of what the future holds for these relatively new business models, my hope remains that availability of many new private trading platforms will improve investment liquidity and support improved business valuations for the many less transparent, privately held companies.
by: Andrew Ochudzawa