Trading in securities of private companies is growing in importance. While most private firms anticipate an exit event as being an initial public offering on an exchange or an acquisition by another firm – events like this tend to take quite some time, typically counted in years. The advent of online capital formation and new exceptions for private securities has helped to facilitate secondary transactions for both retail and accredited investors (in the US).
This week, StartEngine, a leading securities crowdfunding platform that has launched a secondary trading service, announced two issuers that may now have their shares bought and sold by investors via the platform.
StartEngine Secondary is an alternative trading system (ATS) that is regulated by the SEC and operated by StartEngine Primary, LLC, a broker-dealer, also registered by the SEC as well as FINRA. StartEngine Secondary is one of the few platforms to offer secondary trading in the US to smaller investors.
StartEngine focuses on issuers utilizing two securities exemptions, Reg A+ and Reg CF. Under Reg A+, immediately following a securities offering, shares may trade on an ATS (or an exchange for that matter). Reg CF securities may not trade immediately like Reg A+ but issuers must agree to have their shares available for trading providing a quicker path for a liquidity event.
The challenges for smaller market trading is liquidity and pricing – two issues that many observers expect to sort themselves out over time as these markets grow. StartEngine notes that there is no guarantee for active trading or shares listed for sale may be scooped up by another investor but, regardless, this is a big step in the right direction for both issuers and smaller investors.
The two companies announced for trading this week both issued shares under Reg A+.
First, there is Graze a company that raised $5.3 million on StartEngine from over 4,000 investors. Graze provides autonomous electric lawnmowers and reports contracts for 335 mowers to date.
Then there is Parallel Flight Technologies, a company that provides heavy lift drones that can fly for over 2 hours.
Parallel Flight has created patent-pending drone technology that can carry heavy loads for over two hours. Parallel Flight raised more than $7.6 million on StartEngine from over 6,000.
You can expect StartEngine to announce a growing number of crowdfunding issuers to enable investors to trade shares in the coming months.
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