Equity crowdfunding is still in a holding pattern, hovering over the regulatory process in Washington DC. The merits of crowdfunding continue to become more self evident as progress is made in the UK and around the world. One subject about equity crowdfunding which has only been lightly discussed is the need for a secondary exchange for the purchased shares.
Modern stock exchanges around the world have evolved from open outcry to fast electronic transactions. The efficacy of transactions and the speed of trading is incredible. Technology has allowed a global market to evolve, generating liquidity for corporations and facilitating their capital needs. But what of the forthcoming shareholders in crowdfunded companies? How will shareholders be able to sell or buy shares after the initial offering? The answer to these questions are still unknown.
Perhaps the platforms will take an approach similar to the Dutch portal Symbid and allow shareholders to trade their shares natively on the Symbid platform. Or maybe SecondMarket will leverage their existing trading platform to facilitate trading across a much broader and diverse population.
One thing is certain though. Equity crowdfunding demands an exchange where buyers and sellers can transact their shares. An exchange which is robust, transparent and efficient. Transparency and the light of day will always be the best defense against any potential fraud or malfeasance. We hope to know the answer to these questions soon.