Today is a big day for SecondMarket. In fact, it’s one of our biggest.
We’ve spent the past couple of years helping private companies develop liquidity programs for their shareholders. Our company-controlled model, which gives companies full control over their liquidity programs, has been hugely successful. Today, I am pleased to announce that we completed our first internal liquidity program – SecondMarket trading on SecondMarket - and it was a resounding success.
Our own liquidity program has been a fascinating experience for us. All of the advantages we offer our clients – selecting eligible buyers, maintaining shareholder control, determining timing, providing an employee attraction and retention device – manifested in this transaction. We were able to offer employees and other shareholders interim liquidity in a controlled environment, and we provided audited financial reports, risk factors and other information to the eligible buyers and sellers. Transparency is a necessity for a functional market but it doesn’t mean that the entire world (or even the entire SecondMarket community) has access to company financials. The key is that eligible participants have that company information.
We are thrilled and grateful for the extensive interest we received from the investor community, and we’re excited to welcome our newest shareholders. The secondary transaction was led by The Social + Capital Partnership, a new fund created by former Facebook executive Chamath Palihapitiya. SecondMarket is the fund’s first investment. Additional investors include A Grade Investments, Yuri Milner, Stephan Paternot, Shakil Khan, Ian Osborne, Frank Lavin, Dan Schwartz and others.
SecondMarket shareholders, including current employees, sold approximately $13M in common stock at a valuation of about $160M in what we anticipate will be an annual liquidity event. Why are those numbers noteworthy? Because 10 to 20 years ago, a transaction of this size could have been an IPO. Today, companies of our size simply should not go public because they will not receive the requisite research coverage, sales support and liquidity needed to survive our casino-like public markets. A SecondMarket liquidity program can help fill the void by empowering companies to decide when and whether to go public.
Everyone is aware that we’ve worked with some of the largest VC-backed private companies, but the beauty of this market is the value added for growth-stage companies that are not large enough to successfully navigate the public markets. Market observers believe companies should have a market cap of $1 billion+ before contemplating an IPO. However, $200M companies – not unlike SecondMarket – want to provide interim liquidity to their shareholders, and we’re giving them the opportunity to do so.
Today, I’m incredibly proud of the hard work and dedication of the nearly 150 SecondMarket employees. Our success would have been impossible without their intellect and enthusiasm. That hard work has created real shareholder value, and I’m glad that some shareholders were able to get the interim liquidity they deserve.
Founder and CEO