The private securities market is hot. This market is far larger than public markets as excessive regulation and policies that lack foresight have undermined public markets, pushing activity away. Reg D issuance is measured in the trillions, and some of these issuers are for private firms that are growing rapidly and need additional capital to keep things going. At times, holders of these securities want to sell their holdings before the firm becomes public thus creating an opportunity for investors interested in purchasing shares before they trade on a regulated exchange.
In an article posted on Secondaries Investor, Blackstone Strategic Partners executive Verdun Perry says private secondaries could top $170 billion next year.
While there are marketplaces that open up this sector to smaller investors like Forge, EquityZen, and MicroVentures, much of this activity happens with big investment firms. Globacap, a UK-based platform, offers access to private securities via a white-label service. The firm aims to “bring public markets-like efficiency to private markets,” including both primary offerings and secondary trading. Globacap believes that technological advancements are eroding the advantage of public markets and transforming private markets.
Myles Milston, Co-Founder and CEO of Globacap, explained:
“Fuelled by advancements in technology, the secondaries boom has eroded one of the key advantages that public markets offer investors: liquidity. Thanks to digitisation, investors are now able to buy and sell existing assets more easily, dramatically boosting liquidity and market efficiency. This growth in the private secondaries market is helping to drive the tectonic shift we’re witnessing from public to private capital markets. As liquidity, funding and efficiency improve, private markets are increasingly able to compete with public markets for investors’ attention.”
Milston notes that public companies represent just 0.1% of investible assets, and access to private markets is quickly becoming more accessible to the masses.
“We believe that secondaries will continue their record-breaking growth for many years to come,” says Milston.
As new leadership steps in and the US undergoes an enormous shift in policy regarding securities markets, private securities may boom. For years, US policymakers have pushed back on private and public markets, with some looking to undermine private markets to benefit public markets. This is an obtuse approach and will now change.