M&A

Nasdaq Buys SecondMarket to Boost Pre-IPO Presence

With startups staying private longer, Nasdaq has been looking for ways to help them raise capital and manage secondary transactions.
Katie Kuehner-HebertOctober 23, 2015

Nasdaq has acquired SecondMarket Solutions, a pioneer in selling pre-IPO shares of startups, in a move to extend its reach into private company transactions.

SecondMarket will join Nasdaq’s Private Market division, which was launched last year to help private companies raise capital and manage secondary transactions. The terms of the deal were not disclosed.

“The combination of Nasdaq Private Market and SecondMarket provides an exceptional platform for private companies to manage their equity and provide liquidity events for employees and investors,” said Nelson Griggs, executive vice president at Nasdaq, said in a news release.

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The deal, he added, “creates new opportunities to serve the equity needs of companies throughout their time in the private arena.”

SecondMarket, which was founded in 2004, initially developed a platform for trading shares of Facebook and other in-demand startups. After Facebook went public, it changed its focus in 2013 from one-off trades to exclusively company-sponsored transactions.

To date, the company has facilitated more than 70 company-sponsored tender offer programs on behalf of private companies and processed more than $2.5 billion in transaction volume.

SecondMarket has hardly been a roaring success, however. Some community banks in particular had problems migrating to the private platform, and one even pulled its shares from SecondMarket.

“For the last seven years, we at SecondMarket have worked to improve liquidity in the private markets by building innovative software solutions for private issuers,” said SecondMarket CEO Bill Siegel, who will lead the expanded Nasdaq Private Market business. “We are thrilled to be joining the Nasdaq team and leveraging their industry-leading capital market expertise to better service our clients.”

Siegel noted that as startups stay private longer, “they face increasing pressure to provide liquidity to employees and early investors. Our combined offering strives to give private companies a comprehensive, company-controlled solution to attract and retain talent, while also providing tools to effectively manage their equity ownership and secondary liquidity for their employees and shareholders.”

According to TechCrunch, pre-IPO liquidity eases pressure on companies to complete a public offering or sale. While the share value generally goes up at the time of the IPO, employees may have an interest in selling some shares beforehand to buy a home or make other large purchases.