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We are The Little Board [not The Big Board] ."OTC alt-Bourse" |
| Private
Unregistered Company Stock
OTC Description Private Company Market facilitates transactions in both debt and equity securities in a wide variety of dynamic, high growth private companies. By some accounts, up to $200 billion has been invested in private companies by venture capital funds and angel investors over the past 5 years. The lack of a functioning IPO market and minimal M&A activity have left shareholders with few options for liquidity in these investments. Moreover, systemic problems facing companies wanting to go public, including lack of research sponsorship, requirements stemming from Sarbanes Oxley, etc., compound the problem of an IPO as an exit strategy. For those companies seeking to stay private, administrative burdens surrounding shareholder management and communication add to the pressing need for liquidity. Through SecondMarket, private companies have the ability to opt-in to an organized and controlled private marketplace environment. This platform enables early investors and employee shareholders of private companies to exit their investments in cooperation with | company management. SecondMarket affords companies with a set of robust tools, allowing streamlined shareholder communication and access to SecondMarket's market participants. Shareholders of privately held companies have seen their liquidity options dwindle over the past couple of years. The lack of a functioning IPO market and minimal M&A activity has caused the gestation period, or time from initial funding to exit, to swell to over 8 years. The traditional venture capital model relies upon a successful exit in 3 to 5 years, leaving many investors with a very real and very pressing need for liquidity. Employee-shareholders, consultants, angel investors and venture capitalists are being forced to hold on to their equity stakes due to the absence of a market for private company securities. Compounding the liquidity issues facing companies and investors are the systemic problems for smaller companies looking to go public. The marketing and capital raising benefits of being publicly traded are far outweighed by the burdensome listing requirements that a public company must adhere to, as | well as the difficulty in obtaining long-term sponsorship. Smaller companies often times have very thin trading volumes, diminishing the incentive for brokerage firms to publish research on them. In addition, the significant compression of trading commissions over the past decade has ceased making small-cap stock trading, market making and stock research sponsorship economical for sponsoring brokerage firms, further exacerbating the problem. Companies also take on extraordinary monetary costs to comply with the rules and regulations that govern public entities. Often, the price paid to be “public” isn’t justified, with the stock price languishing due to a lack of investor awareness and demand. Exiting through an M&A transaction, the other liquidity option currently available, is often a less than optimal alternative. Many times the value of the acquired company is eroded as the target is being integrated into the acquirer. Shareholder value diminishes and the vision of the original entrepreneur and company is lost. |
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