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Investing in private, high-value companies is now more attainable

Wednesday, November 18, 2020

Secondary Trading is where investors buy or sell (trade) shares (securities) in private/ unlisted companies. This trading differs from a stock exchange in that the secondary market deals with private unlisted companies rather than publicly listed ones.

Since the early 2000s, trading on secondary markets has grown rapidly. One reason for this is the trend for companies to stay private or unlisted for longer. According to McKinsey and Company, the average age of U.S. technology companies going public in 1999 was 4 years. By 2019, the average was 11 years.

Meanwhile, private investment in global technology companies has boomed in recent years, giving rise to the “decacorn” companies (privately held companies with a valuation in excess of $10 billion). Taking longer to go public means employees holding equity in an increasingly valuable company are often anxious to offload some of that equity to an investor looking for unique access to these shares. Shareholders ability to trade private unlisted securities has typically been limited – until recently.

Broad access to this secondary marketplace is a relatively new development. A 2018 Stanford University study stated:

“The pre-IPO marketplace has traditionally been dominated by networks of venture-capital firms, private placement agents, brokers, and banks. These markets have historically been fragmented and opaque, severely limiting access and transparency for potential investors. In response to the trend of companies staying private longer, a number of secondary private-company marketplaces have evolved to facilitate transactions between employees or early stage investors wishing to liquidate a portion of their holdings and qualified buyers.”

The advent of pre-IPO (initial public offering) secondary marketplaces provides “everyday” investors with previously unavailable access to private companies. As companies stay private longer and are worth significantly more before they finally list on a stock exchange, it is reasonable to expect that this access will become an increasingly valuable asset for savvy investors.

There is a tremendous amount of value locked up in private, pre-IPO companies and secondary trading on platforms such as www.primarymarkets.com are providing access as well as unlocking that value.

PrimaryMarkets can trade shares, bonds and units via its global platform which reaches over 110,000+ investors globally. PrimaryMarkets approach to secondary share trading is unique, as the company whose shares are being exchanged is considered a key stakeholder in our process. Sign-up for free membership.

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