Secondary Market Notes: Two New Stock Exchanges For Emerging Companies

As time goes on, a picture of what crowdfunding’s secondary market will look like becomes clearer. Recently we’ve learned of two major happenings in regards to small business liquidity that may prove pivotal going forward.

The California Stock Exchange

Headed by Howard J. Leonhardt, The California Stock xChange hopes to bring liquidity to choice companies that choose crowdfunding as a means of raising capital. We spoke to Mr. Leonhardt recently to get more information about this effort.

We have a goal to be the third major stock exchange in the US and we believe that the best of the best of the companies coming out of crowdfunding will be given the opportunity to go public on this California Stock xChange.Howard J. Leonhardt

Most notable about this new exchange is the focus on social impact investments. Leonhardt says that the California Stock xChange is “designed to be the very first concious capitalism stock exchange with an emphasis on local investing.” Concious capitalism is a term originally coined by Whole Foods co-CEO John Mackey and refers to a more holistic way of evaluating a company. Analysts will be encouraged to evaluate companies based not only on the bottom line, but also their affect on the communities around them.

Leonhardt says this focus on social impact investing doesn’t have to come at the expense of the bottom line. “if you have a good solid company treating people well, happy customers… youre going to be on a more steady upward development,” he said. “It might not be as fast and rapid, but it’s going to be more steady. We want to build a stock exchange around that principle.”

He points out that Intel was an $8 million IPO on NASDAQ in 1984 and hopes that the California Stock Exchange can play host to similar investment opportunities soon. “We kind of want to turn back the clock to where NASDAQ was in 1984 as far as the size of the offering, but we’re also not going to go really low.” he said. “Our sweet spot will be a company that is doing an $8 million raise that already has $30 million in annual revenues.”

We’ll have much more from Mr. Leonhardt, the California Stock xChange and their concept-to-IPO accelerator in tomorrow’s top story.

NASDAQ Private Market

NASDAQ OMX and SharesPost are teaming up to create the NASDAQ Private Market, a new securities marketplace for accredited investors. From the press release:

The venture combines NASDAQ OMX’s market and operating expertise as well as resources with SharesPost’s leading web-based platform.


The NASDAQ Private Market (NPM) will provide improved access to liquidity for early investors, founders and employees while enabling the efficient buying and selling of private company shares. While NASDAQ will retain a majority stake in the venture, specific terms of the joint venture were not disclosed.

You may recognize the SharesPost name. SharesPost is a primary competitor to SecondMarket. The move to team with the folks at NASDAQ makes sense as the pre-IPO market has been shaken by the turmoil of recent tech IPOs like Facebook, Zynga and Groupon.


A NASDAQ OMX representative told Crowdfund Insider that “NPM’s initial focus will be secondary trading for much later stage private companies, typically those that have previously sourced venture capital financing.” He clarified that crowdfunding “has principally been utilized for access to small amounts of primary capital by very early stage private companies,” and therefore the NPM may not be suitable for these types of securities.

Greg Brogger, President of NPM and former CEO of SharesPost, will be participating in a panel discussion at the upcoming Innovative Investing Symposium 2013 by The Soho Loft in Boston at the Thomson Reuters Partner Connect event.

Liquidity “For The Rest Of Us”

NPM’s focus is clearly on VC-backed companies, and the California Stock xChange wants companies with at least $30 million in annual revenue. That leaves a pretty substantial hole in the market for small companies. The exchange of securities is a high risk, low margin business. The SEC has expressed desire to fill the liquidity gap recently, so expect more news on this front in the future.

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