The deal could help drive more transactions to Nasdaq Private Market, the New York-based exchange operator’s trading platform for shares of companies that haven’t yet had an initial public offering.
Trading in pre-IPO shares has heated up in recent years as startups have waited longer to go public. Employees of such companies often seek to cash out of their shares, while investors may want to get in on a fast-growing technology startup.
Under the deal, which is set to be announced Tuesday, Nasdaq Private Market will be moved into a separate, stand-alone company that will receive investments from a group of banks. The group includes
Goldman, Morgan Stanley and
owner of Silicon Valley Bank.
Terms of the transaction weren’t disclosed. Nasdaq said it would remain the joint venture’s largest shareholder.
Most individual investors can’t buy shares on Nasdaq Private Market or other markets for pre-IPO shares. Under current regulations, such deals are typically limited to accredited investors—people who meet certain wealth criteria, such as having a net worth of more than $1 million, excluding one’s home, or an annual income above $200,000.
Still, a number of rival trading venues have emerged to bring together buyers and sellers of shares in private companies. These include Carta, ClearList, EquityZen Inc. and Forge Global Inc.
Nasdaq is betting that the bank deal will make Nasdaq Private Market the dominant venue for trading of pre-IPO shares. Its bank partners include some of the biggest Silicon Valley deal-makers, with clients that encompass both startups and well-heeled investors.
“The banks that we’re working with will bring a massive amount of distribution,” said
an executive vice president at Nasdaq.
Nasdaq says its private-market platform is already the leading venue for private-company tender offers. In such transactions, the holders of private-company shares are allowed to sell them within a specified window of time, usually to a large investor or to the company itself.
Cryptocurrency exchange operator Coinbase Global Inc. and cloud-software provider
are among the companies that used Nasdaq Private Market before their IPOs.
In the first six months of 2021, Nasdaq Private Market facilitated a record 57 private-company secondary transactions, according to the exchange operator. The platform handled $4.6 billion in total transaction value in the period, the highest level in three years, Nasdaq said.
Nasdaq said its technology and expertise in running markets could help improve the experience of trading pre-IPO shares.
Many of the existing venues for pre-IPO shares have thin volumes, high fees and wide spreads between the buying and selling prices of shares. Due to the paperwork requirements of private-securities deals, it can take weeks for a trade agreed on some of these platforms to result in the actual delivery of the shares.
Nasdaq Private Market was formed in 2013 as a joint venture between Nasdaq and SharesPost, an online marketplace for trading pre-IPO shares. In 2015 Nasdaq acquired SecondMarket Solutions Inc., a competitor in the space, and integrated it into the business.
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