Nasdaq OMX Group Inc. and SharesPost Inc., an online marketplace for trading shares in closely held companies, will set up a joint venue where brokers can trade stocks of firms before any initial public offering.
The second-biggest U.S. exchange operator will hold a majority stake in the business, which will be known as the Nasdaq Private Market, Nasdaq said in a e-mailed statement today. The venture will start later this year, pending regulatory approval, and will be based in San Francisco and led by SharesPost founder Greg Brogger. SharesPost’s existing broker-dealer business will operate separately from the joint venture, Nasdaq said. Financial terms weren’t disclosed.
“The support of entrepreneurs is a fundamental element of our DNA,” Bruce Aust, executive vice president of Nasdaq, said in the statement. The new venture “will provide private companies additional flexibility as they plan for their future.”
Last year, the Securities and Exchange Commission looked into trading in closely held companies such as Facebook Inc., which had filed to sell shares in the largest initial public offering of an Internet company. The SEC examined whether the trades expose investors to fraud because the companies aren’t required to disclose financial data, including revenue, cash flow and debt obligations, and frequently carry restrictions, such as limits on share sales. Facebook listed on Nasdaq in May 2012.
“An increasing number of companies are choosing to remain private longer, which requires an efficient means to access liquidity for employees and investors,” Nasdaq said, adding transactions on NPM will meet Nasdaq’s “standards for security, compliance and client support.”