Buying shares of private companies can be challenging. To complete a transaction, you must find a seller of the desired shares, negotiate price, execute legal agreements and work through the issuer’s the right of first refusal and other transfer requirements. Applicable securities laws must also be understood and complied with. SharesPost has helped thousands of buyers navigate each of these steps.
Typically, to purchase unregistered securities (i.e., private company stock), you must be an “accredited investor” or a “qualified institutional buyer.” These terms are defined under the securities laws as individuals and corporate entities meeting certain financial tests. There is, however, no such accreditation requirement for those selling unregistered securities.
Unlike public companies, private companies are not generally required to make financial disclosures to shareholders or prospective investors. There is also no formal, central marketplace where pricing from prior trades is published. As a result, valuing private company shares can be difficult. Private market investors can, however, leverage SharesPost’s trade and valuation data as well as our proprietary insights. In addition, your Private Securities Specialist is daily in the market facilitating transactions for leading private growth companies. He or she can share their insight into the market and bring together all available information to help you come to a view on valuation and price.
There is certainly no legal requirement that you use a broker to invest in private companies. Many buyers, however, find that using a broker and a private market platform like SharesPost provides several advantages. These include a large amount of sell-side inventory, experience with private company transfer processes, knowledge of applicable securities laws and transaction documents and the expertise to bring these elements together in a successful transaction.
The secondary market for private company shares in its current form is relatively new - so it can be hard to know which firms you can trust. We recommend that you select a broker with a proven track record and the resources to optimize your chances of a successful transaction. First and foremost among these resources is an investment professional who is expert in private market secondary transactions. Other needed resources include a large amount of sell-side inventory, relationships with private growth companies, insights, and data and a strong legal, compliance, and operations team.
Generally private companies are supportive of their shareholders finding liquidity. They do, however, have a number of valid concerns regarding such stock sales. These include sensitivity to disclosure of financial information, the impact secondary sales may have on their option pricing and/or valuation of the company and compliance with securities laws. Each issuer has different policies and processes in place to address these concerns. For example, almost all issuers impose a right of first refusal on secondary stock sales and require legal opinions. Your SharesPost Private Securities Specialist will help you navigate your relationship with the company and compliance with their preferred transaction process.
Selling shares of private companies can be challenging. To complete a transaction, you must find a buyer, negotiate price, execute legal agreements and process the transaction with the company. Applicable securities laws must also be understood and navigated. SharesPost has helped thousands of buyers and sellers execute each of these steps.
Typically, to purchase unregistered securities (i.e., private company stock), you must be an “accredited investor.” An accredited investor is someone who meets certain financial tests mandated by the securities laws. There is, however, no such accreditation requirement for those selling unregistered securities.
No - there is certainly no legal requirement that you use a broker to sell private company shares. Many sellers, however, find that leveraging a broker and a private market platform like SharesPost provides several advantages. These include a large network of potential buyers, experience with private company transfer processes, knowledge of applicable securities laws and transaction documents and the expertise to bring these elements together in a successful transaction.
The secondary market for private company shares in its current form is relatively new - so it can be hard to know which firms you can trust. We recommend that you select a broker with a proven track record and the resources to optimize your chances of successfully completing a transaction. First and foremost among these resources is an investment professional you connect with on a personal level - one who is expert in private market secondary transactions, Other needed resources include a large network of investors, relationships with companies like yours and a strong legal, compliance and operations team.
Founded in 2009, SharesPost is a full-service, clearing broker dealer and registered investment advisor dedicated exclusively to the private growth equity asset class. Our clients and investment professionals leverage our proprietary insights, transaction data and information technology. We have facilitated more than 4,000 transactions in more than 150 private growth companies. Institutional investors know they can rely on SharesPost not just at the time of sale, but throughout the life of their investment.
Though the private market is becoming more transparent, it remains a market characterized by limited information. The availability of issuer financial and other diligence materials varies from transaction to transaction. Because of our strong working relationship with many issuers and fact that we are also a shareholder in many cases, we typically have access to more information than other private market participants. Wherever possible, SharesPost connects institutions and issuers under non-disclosure agreements to support disclosure.
Private market secondary liquidity has improved markedly over the past few years. As more and more private growth companies reach a size suitable for institutional investment, institutional capital has been migrating into the private market. Issuers have responded by raising larger private financing rounds and becoming increasingly supportive of shareholder liquidity. Still, when it comes to secondary transactions, investors should be aware that each private issuer has their own preferences, restrictions and processes and should consider their exit strategy prior to investing.
SharesPost supports multiple structures for private market investments and so compensation arrangements vary. Typically though SharesPost will charge transactions participants a commission based on the size of the transaction and, where a special purpose vehicle is being employed, a management fee to the investors in the vehicle.
SharesPost’s broker dealer, SharesPost Financial Corporation (SPFC), is a wholly owned subsidiary of SharesPost, Inc. SPFC is a FINRA registered, clearing broker and is registered with the SEC as an Alternative Trading System. SharesPost’s Registered Investment Advisor, SP Investments Management, LLC, which manages the SharesPost100 Fund and other investment entities, is registered with the SEC. [SharesPost] is also a licensed California lender.
SharesPost works with each issuer to customize our services to meet their unique needs. SharesPost’s issuer solutions range from informal shareholder-by-shareholder referral relationships to the structuring and management of large, formal liquidity programs.
SharesPost requires that prospective buyers of shares execute non-disclosure agreements prior to engaging in detailed conversation regarding an investment opportunity. In addition, any financial information provided to us by an issuer is shared only with the consent of the issuer and on a need-to-know basis.
SharesPost’s legal and compliance teams have significant private market transactional experience. SharesPost transactions rely on frequently used exemptions from the registration requirements of the Securities Act of 1933, as amended.
SharesPost genuinely works with issuers to understand their investor preferences and secondary policies and processes. Our private securities specialist, legal and operations teams work together to establish issuer trust one transaction at a time. We are committed to delivering the highest quality execution and treating the issuer as a valued client.
SharesPost’s wholly owned subsidiaries include a registered broker dealer and Alternative Trading System as well as a Registered Investment Advisor.
Typically SharesPost’s broker dealer charges transaction participants industry standard commissions.
SharesPost and Nasdaq OMX Group (Nasdaq) teamed up to form the Nasdaq Private Market (NPM) in 2013. In 2015, SharesPost sold its interest in the NPM to Nasdaq. Though SharesPost remains a member broker dealer of the NPM, SharesPost is no longer an equity holder.