Nasdaq to spin out private market in joint venture with major banks

New platform will serve a 'large and growing' need for trading private company shares

The outside of the Nasdaq market site in New York. Reuters

Nasdaq said on Tuesday it will spin out its Private Market to form a new platform for trading unlisted company shares through a joint venture with a number of major banks.

The exchange said the new company, in which Citi, Goldman Sachs, Morgan Stanley and SVB Financial Group (owner of the Silicon Valley Bank) are investing, will establish "an institutional-grade, centralised secondary trading venue" for companies, brokers and investors to trade in private company shares.

“Using the scale and distribution of our joint venture partners alongside our market leading technology and markets experience, Nasdaq Private Market will become the go-to marketplace that connects and manages the need of the entire private ecosystem through one platform,” said Nasdaq Private Market president Eric Folkemer.

The Nasdaq Private Market was first set up in 2014 to provide a way to allow private companies to trade shares ahead of a stock market listing.

The ever-greater sums of funding allocated to private equity – more than $4.95 trillion in the five years between 2016 and 2020, according to Bain & Company – mean that fast-growing companies often stay private for much longer.

As a result, they "need the ability to offer their employees a safe and easy way to generate liquidity while they are building their businesses”, said Greg Becker, chief executive of SVB Financial Group.

“Together with Nasdaq and this impressive consortium of leading banks, we are establishing a secondary trading venue for private company stock that will offer our clients a path to employee retention in an environment where access to talent is one of the biggest challenges.”

Over the past five years, 477 private companies serving 59,000 shareholders have completed transactions on the Nasdaq Private Market, executing more than $30 billion worth of transactions, the exchange said.

The new platform will allow companies to better manage changes to equity structures and equity-linked pay as well as allowing continuous trading to provide better price discovery ahead of any listing, it added.

Nasdaq earned $2.9bn in revenue last year, a 15 per cent increase on 2019, while net income grew 10.8 per cent to $224 million.