September 15, 2021

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Jamie Green

The tears generated by the potential loss of Sydney Airport from the ASX were barely dry when Canva showed the power of private markets, which dwarf the ASX and are finding new avenues for liquidity.

It has been a huge week for public and private markets, with the $32 billion Sydney Airport a step closer to leaving the ASX and Canva co-founder Melanie Perkins trumpeting a $US40 billion ($54 billion) valuation.

While it is inevitable that Canva will end up listing on the Nasdaq exchange in New York, there is no shortage of Australian unicorns happy to remain in private hands with stock traded outside traditional exchanges.

New liquidity opportunities emerge for Unicorns who delay an IPO

This is a global trend that has opened up enormous opportunities for those able to provide liquidity for large private companies, family offices and organisations that pride themselves on employee ownership.

Two deals done in the last 24 hours by private market platforms in Australia and the US highlight the growth of alternative venues for trading in private companies, many of which will never go public.

On Tuesday in the US, Forge Global, a global private securities marketplace, said it would merge with Motive Capital Corp, a special purpose acquisition company (SPAC) sponsored by affiliates of private equity firm Motive Partners.

The Forge deal, which is expected to be completed by the end of this year or early next year, puts a value on the combined company of $US2 billion.

Forge’s success is a tribute to the surge in entrepreneurs happy to avoid the regulatory and compliance costs of a public share market listing. The number of private companies trading on the Forge platform doubled between January 2018 and June this year.

It has about 400,000 registered users, including more than 123,000 accredited investors, who have traded in more than 400 companies with $10 billion in volume across 19,000 transactions with buyers and sellers in 70 countries.

There is an intriguing twist to the Forge deal that would not have escaped close watchers of the ASX’s CHESS clearing and settlement replacement project.

Motive Capital Corp is headed by Blythe Masters, who was previously the original CEO of the ASX’s partner in the CHESS project Digital Asset Holdings.

Masters recently teamed up with ASX deputy CEO, Peter Hiom, who joined Motive Partners earlier this year after resigning from the ASX.

At the time, Hiom said he looked forward to playing a part in “shaping the industry’s future”.

It so happens the CHESS project, which Hiom was responsible for until October last year, contemplates the inclusion of a private equity register alongside its CHESS public equities register.

This would enable the ASX’s distributed-ledger-as-a-service to offer owners of private companies a register or record of ownership that would enable the transfer their shares.

The listing or exchange trading mechanism for private companies could be done by a third party, such as Forge.

ASX reminded the market of this potential growth possibility from the CHESS replacement during a presentation to clients of Link Group led by ASX group executive, securities and markets, Tim Hogben.

PrimaryMarkets is still Australia’s most success private markets trading platform

Australia’s most successful private markets trading platform is PrimaryMarkets, which was founded by Gavin Solomon, and is now being taken over by listed software company, Complii FinTech Solutions for $7 million.

Complii provides software for managing the back office compliance obligations for more than 100 organisations holding Australian Financial Services Licences including brokers such as Cannacord Genuity, Shaw and Partners and Blue Ocean Equities.

About 3000 brokers and financial planners use its platform.

Complii CEO Craig Mason says the main attraction of PrimaryMarkets is the additional distribution capability from having access to its 110,000 clients.

Private markets remain 20 larger than public markets in Australia

He says the private markets in Australia are probably worth about 20 times as much as the $2 trillion capitalisation of the ASX. He says at least half of the 120,000 private companies in Australia have “real valuations”.

Mason says a significant proportion of the $14 billion in capital raised in Australia last financial year was raised by clients of Complii.

PrimaryMarkets has about 30 unicorns listed on its platform including two Australian companies VGW, which is an online social casino and poker games software house, and Animoca Brands

, the branded blockchain gaming company delisted from the ASX in March last year.

Solomon admits brokerage is higher on private markets than on public markets but “that cost is balanced by all the compliance, time and effort and huge costs incurred by issuers being on listed markets”.

He rejected a suggestion that private markets have clunky processes and boasted that PrimaryMarkets did its first T+0 trade in May this year.

“We have online anti-money laundering and know-your-customer coupled with online sophisticated investor verification and online escrow plus we have our share registry business that we built internally,” Solomon says.

One of PrimaryMarkets’ claims to fame is that it traded about $40 million in shares in Tyro Payments before the company was listed on the ASX in december 2019.

Private companies offer limited internal liquidity solutions

A spokesman for Canva said the company does offer shareholders, including staff, the opportunity to sell their stock.

“From time to time, Canva may facilitate broad liquidity opportunities for its shareholders,” the spokesman said.

“We don’t have anything to share at the moment in this regard, and this valuation is off the back of $200 million capital raised from new and existing investors.”

Canva appears to be following the trend in private markets whereby capital raisings have become a regular liquidity event rather than an irregular exercise that is only done when in need of more growth capital.