In mid-December, the United Kingdom’s Financial Conduct Authority issued “proposals for a new platform – the Private Intermittent Securities and Capital Exchange System (PISCES) – on which shares in private companies will be bought and sold.”
The consultation came amidst heightened concern and consternation about a falloff in London Stock Exchange (LSE) initial public offerings and a loss of listings to markets perceived to be more robust and dynamic, particularly in New York.
“Because reforming capital markets is a priority for this government, we are today committing to legislate to establish PISCES, an innovative new stock market, by May 2025 to support companies to scale and grow,” Chancellor of the Exchequer Rachel Reeves declared in a November Mansion House speech tying market initiatives to the Labour government’s economic growth strategies.
Chancellor Rachel Reeves
Between and behind those lines, however, the U.K. clearly has catching up to do. Fueled by entrepreneurship rather than government jawboning, specialized trading platforms in the United States have been facilitating private-share transactions for more than 20 years. Most prominently, an offshoot of Nasdaq has ridden waves of high-tech startups’ issuance of restricted stock and has been sustained by such companies’ continued tendency not to go public.
The LSE took a step in this direction three years ago, announcing a strategic investment and partnership agreement with private market platform Floww.
Also in 2022, Deutsche Börse said it was partnering with Forge Global Holdings of the U.S. to establish Forge Europe, “a digital platform for private growth company shares.” Forge, formed in 2014 and now publicly traded, has operational hubs in Germany and the U.K. It said in its second-quarter 2024 earnings report, “Forge Europe has now closed its first trades in cooperation with local partners and is planning to further expand across Europe into Austria, Switzerland and France.”
Deutsche Börse’s DB1 Ventures is a strategic investor in Caplight, which since 2022 “has aggregated over $300 billion of secondary market transactional data,” DB1 said in November 2024. “Brokers on Caplight’s platform include bulge bracket investment banks, secondary market platforms and independent boutique brokerages that focus exclusively on pre-IPO. Institutional investors subscribe to Caplight’s platform to receive best-in-class private market transaction data and valuation analysis tools.”
Globacap, a U.K. private-market venture funded in part by Cboe Global Markets, has said little publicly about a platform that they are working on together. Globacap is reportedly looking to operate within the proposed PISCES framework.
“It will enable private companies to access the funding and liquidity they need while avoiding the complexity and expense of going public,” Globacap CEO Myles Milston told the London publication City AM. “Investors will be able to realize their gains sooner, as it will be easier for them to find buyers for their shares.”
Bank of New York Mellon Corp. in September announced Alts Bridge, “a comprehensive data, software and services solution built to meet the growing demand from wealth intermediaries looking to access alternative and private market investment products.” Alts Bridge makes accessible “a curated, comprehensive suite of leading alternative and private market asset managers from around the world.”
The leader in capturing private-share business is Nasdaq Private Market (NPM), which the New York-based exchange operator formed in 2013 and two years later acquired SecondMarket Solutions, which was founded in 2004 by fintech and later digital-asset investing pioneer Barry Silbert. Spun out in 2021 under consortium ownership, NPM raised $62.4 million in a February 2024 Series B funding led by Nasdaq, with participation from current investors including Allen & Co., Citi and Goldman Sachs, and new investors including BNP Paribas, DRW Venture Capital, UBS and Wells Fargo.
The Nasdaq-branded platform has lived through cyclical ups and downs in what it defines as a $3.5 trillion private market, and has turned a corner as a 2021-22 downturn in private-share issuance recedes into the distance.
According to Opimas analyst Suzannah Balluffi, the headcount across 16 private equity and credit platforms that she tracks fell 7% between the fourth quarters of 2023 and 2024 (to 3,669), after declining 6% the previous year. The fluctuations are “an indicator of the businesses struggling or over-hiring during the boom,” she commented.
“We went through a year and a half of ambiguity, when it was difficult to figure out what the share of a private company was worth, because the last valuation was at the peak of a bubble,” recalled NPM chief executive officer Tom Callahan.
Forge Global reported third-quarter 2024 trading volume rising 44% year-over-year, as its total revenue less transaction-based expenses was up 4%, to $19.1 million.
Effective January 20, former London Stock Exchange Group managing director James Nevin has joined Forge Global as chief financial officer.
Forge Global’s private market index FPMI showed gains in October and November as the benchmark lagged public market indexes.
NPM completed more tenders in the first four months of 2024 than in all of 2023, Callahan revealed. In September, the company announced the launch of “the most significant new product” in its history, the next-generation NPM SecondMarket platform. NPM said it “drew upon a decade of experience from facilitating over $55 billion in volume for nearly 200,000 eligible private company employees and investors.”
“Our new platform will facilitate wealth-creation events for millions of private company employees and investors,” said Callahan, previously head of global cash management and Global Operating Committee member at BlackRock, and CEO of the NYSE Liffe U.S. futures exchange. “This disruptive technology benefits private companies and their employees by making transacting private shares faster, cheaper, easier and more secure.”
Tom Callahan, CEO, Nasdaq Private Market
Callahan cited pain points that NPM SecondMarket is addressing, such as the lengthy timeframes, sometimes months, for settling secondary private-security trades.
“The trade gets reported to us, and we settle it very efficiently, usually in less than a week,” the CEO said.
Another issue is wide, even intraday, price discrepancies that share-owning employees may see. SecondMarket aggregates public-realm data to provide more reliable valuations.
“We’re essentially educating the seller, who can then negotiate, match and settle trades, without a broker and for a flat 1% commission,” Callahan explained.
Through a partnership with Wealthfront, announced on January 14, NPM said that “private company employees can easily direct proceeds from secondary liquidity events to Wealthfront via the NPM platform and choose from a variety of products across the risk spectrum to help achieve their financial goals.”
Todd Skacan, equity capital markets manager at T. Rowe Price, said the recovery in private-security activity, mainly for shares of well-established brand names, still faces challenges. For one, trades must be approved by the corporate issuers, sometimes at the board level, and many companies simply don’t want their shares to trade.
“If there’s an understanding the platform is going to admit the types of buyers and sellers the company wants to be involved with, that can be incredibly valuable,” Skacan said, as is an ability to transact at prices displayed on screens.
Continued growth in private-share trading might invite tighter regulation. Although that could enhance this market’s transparency, Skacan also points out that regulatory burdens are a factor behind the reluctance to go public.
Callahan believes some level of regulation is inevitable. He noted that high-valuation “unicorns” now number more than 750 in the U.S. There are fewer than 4,000 U.S.-listed stocks, down from more than 7,000 in the late 1990s. Per a recent Bloomberg headline: “Who needs an IPO? OpenAI, Stripe, Databricks and SpaceX have found a different way to get employees paid.”
The first 11 months of 2024 saw a pickup in IPOs, 160 offerings on Nasdaq (raising $22 billion) and 34 on the New York Stock Exchange ($17 billion), Reuters reported.
“Someday regulation will come [to private issuance] because a baseline standard is required for an efficient market,” Callahan said, “and I don’t think we’re there yet.”