Nasdaq announced on Tuesday that they’re partnering with a group of banks to separate their platform, Nasdaq Private Market, which allows investors to trade in stocks of private companies.
The goal of this new partnership is to help increase deal-making activity to Nasdaq Private Market, the New York-based exchange operator’s trading platform for shares of businesses that haven’t had an initial public offering.
Trading in pre-IPO shares has gained popularity over the last few years as promising startups have waited longer to go public. Pre-IPO stands for pre-initial public offering. At this stage, founders sell shares to their tech startup before it’s included in a public exchange listing. Investing during a startup’s early stages helps its founders gain enough funding to launch and scale. Associates of these types of companies may seek to cash out of their shares, while investors might want to invest in a fast-growing technology startup.
Under the deal, Nasdaq Private Market will become an independent business that’ll receive investments from a group of banks. The group includes Citigroup, Goldman, Morgan Stanley and SVB Financial Group (the parent of Silicon Valley Bank!).
“Since we launched Nasdaq Private Market in 2014, we have created a trusted platform for private companies resulting in a strong track record and a robust pipeline of secondary transactions,” said Nelson Griggs, President, Nasdaq Stock Exchange.
“This joint venture will accelerate our opportunities in the private company secondary trading market and establish the standard for technology-driven operational efficiencies, compliance and execution.”
The terms of the transaction for Nasdaq Private Market weren’t disclosed. Nasdaq said it would remain the alliance’s main shareholder and that it can be used by private companies, brokers and investors to access, manage and execute their stock trades.
They also mentioned that the platform will manage private company stock transactions such as tender offers, auctions and investor block trades, in addition to others.