As part of the evolution of the PrimaryMarkets.com platform, we are now live with multiple Ecosystems for the secondary trading of issued securities in Unlisted Companies and Trusts.
After being initially approached last year by BlackWall Property Funds (ASX:BWF), one of our supportive Members, we created an Ecosystem for unitholders to trade their unlisted units in any of the 13 unlisted Property Funds managed by BlackWall in Australia (these funds have a portfolio value in excess of A$600M).
How do unlisted entities support secondary trading for their securityholders without using a PrimaryMarkets.com Ecosystem?
Today, an unlisted Company or unlisted Trust (Entity) with a wide shareholder/unitholder base usually comprised of early stage investors, supportive security-holders, current and former employees has no formal mechanism for existing securityholders to seek to sell their securities.
Securityholders realistically do not have any real means of independent price discovery for the value of their securities or a repository to access current corporate documents.
Where an Entity wants to create an orderly and informed marketplace where its securityholders can trade with confidence and confidentiality, PrimaryMarkets.com can provide the solution.
BlackWall unitholders, using the tailored Blackwall Ecosystem powered by PrimaryMarkets.com, are able to transact (buy and sell) their units to other unitholders - Features of this Ecosystem include:
- The trading of units in any of BlackWall’s 13 unlisted property funds.
- Unitholders can subscribe for new BlackWall offerings or exit their existing investment before the relevant maturity date of each respective Trust.
- BlackWall unitholders are able to utilise the Ecosystem for several purposes:
- Access to up-to-date corporate information on each of the 13 property funds.
- Initiate sell and buy orders for units in any one of the 13 property funds.
- Update their unitholder information.
- PrimaryMarkets.com continues to facilitate secondary trading for unitholders with more than 3.5M units already transacted.
Features of PrimaryMarkets.com Ecosystem Trading Solutions
- Dedicated Ecosystem – customised platform for each Company/Trust and its securityholders
- Security trading conditions – enforce any and all trading conditions stipulated in the relevant constitution
- Transaction controls – timings, conditions of sale, access, Investor profiles can be set for each transaction
- Visibility – Full management and monitoring of transactions
- Dedicated Manager and transaction team
- Online and offline Customer Service support
- Ongoing support – each Ecosystem can be left open or re-opened to support future liquidity events whilst the entity remains unlisted
Advantages of using PrimaryMarkets.com Ecosystem
- PrimaryMarkets supports and facilitates the process on behalf of securityholders through a dedicated Ecosystem
- The Entity can set the timings, conditions of sale, access and investor profiles for each transaction
- The Entity can maintain control over share ownership while addressing the liquidity needs of shareholders
- The Entity can monitor the levels of participation and use the program to reward tenured employees
- PrimaryMarkets’ solution reduces the distractions associated with unchecked open market transactions, both in terms of focus and resources
- PrimaryMarkets organises support for transactions by introducing sell side and buy side to advisors such as lawyers experienced in unlisted security
- Leverage PrimaryMarkets solid process framework and direct, engaged support
- Leverage the experience and network of the PrimaryMarkets team
- Targeted/Invited potential Investors – Access to PrimaryMarkets’ highly sought after institutional, accredited, wholesale, sophisticated and professional investor base
PrimaryMarkets creates a customised Ecosystem specific to each Company/Trust enabling the securityholders to sell and buy securities - Features include:
- Specific membership registration page
- The entity is provided its own ‘Pillar’ at the Menu/dropdown section with the PrimaryMarkets.com platform
- All relevant information and documents to support transactions can be pre-loaded into the Ecosystem to streamline the Listing process for Sellers
- Limited first right of refusal (and other potential sale terms) to acquire the securities can be accommodated.
- Potential Buyers vetted by PrimaryMarkets.com, on behalf of the Sellers, before engagement, if required
- Single point of contact at PrimaryMarkets.com
Multiple Ecosystems provided by PrimaryMarkets.com
Following the success of this first Ecosystem, PrimaryMarkets.com now has multiple Company Ecosystems either in place or under construction for unlisted Companies and Funds across a range of industries.
Why are private liquidity events for Unlisted Companies becoming the ‘norm’?
- Unlisted entities can come under pressure from founding/early stage investors and employees/ex-employees to provide liquidity events over time.
- Secondary security trading solutions now form part of an entity’s strategy to provide access to liquidity for security holdings.
What are the advantages of a private liquidity event with PrimaryMarkets.com?
- An Entity, when working with PrimaryMarkets, has overall control of the process whilst addressing the needs of existing securityholders.
- The Entity gets to enforce security trading conditions as stipulated in the constitution/shareholder agreement.
- The Entity can also create other transaction rules for the sales – timing, number of securities sold, information disclosed, who gains access to the data and sales process, minimum buy size and other specific Entity requirements.
How does a private liquidity event affect valuation?
- Typically, secondary securities trading does not affect Company valuations because the percentage of the capitalisation and distribution table being transacted is usually very small, represents one data point and, where applicable, is rationally interpreted by savvy investors as a liquidity point for early stage investors.
What is ‘Liquidity Premium’?
- When the liquidity premium is high, the security is said to be illiquid, and investors demand additional compensation for the added risk of investing in unlisted securities over a longer period of time.
- With PrimaryMarkets.com’s liquidity services, ‘healthy markets’ are enhanced by more accurate pricing and focus on the operating performance of the underlying unlisted investment rather than timing risks to a return of capital.