SecondMarket sets up online marketplace for private stock sales

April 24, 2009 | Camille Ricketts | Comments | |

SecondMarket, formerly known as Restricted Stock Partners, has launched an online marketplace where private companies and their employees can sell stock, and it claims to have 600 reputable investors already signed up as buyers.

Trading in this environment will give companies greater control over how they sell their stock and who gets to buy it, the firm says. The service has been in testing over the last year but is coming to a head now that most startups have had their IPO dreams indefinitely put on hold.

In addition to facilitating trades, SecondMarket equips startup companies with a platform to communicate relevant information to their shareholders. The New York-based company says its aim is to connect investors — many of whom already work with secondary market firms — with buyers and sellers they might not have found otherwise.

But this reasoning seems a little shaky, considering how much the secondary market has exploded since the economic downturn descended. Investors seem to be navigating the opportunities just fine without a service like SecondMarket. On top of that, there are some legal concerns with a system like this, as paidContent points out. Some companies have shareholder agreements that prevent the sale of stock via this kind of market, and it may be easier for sellers to commit fraud — so little information is known about private companies usually. Given these risks, it may still prove helpful for smaller firms who need more guidance.

In the past, SecondMarket, dealt primarily in illiquid assets and bankruptcy asset awards. This is its first foray into brokering shares of private companies. It raised an undisclosed first round of funding from FirstMark Capital in 2007.

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About the Author, Camille Ricketts

Camille is the lead writer for GreenBeat. She came to VentureBeat from Google where she worked on its traditional platforms team, particularly in TV. Before that, she was a reporter for the Wall Street Journal in New York and London. Follow her on Twitter at @camillericketts, and follow VentureBeat on Twitter at @venturebeat.

With GreenBeat 2009, VentureBeat's all-star conference on all things Smart Grid, coming up in November, Camille will be expanding coverage of this exciting space. Stay up to date by following @greenbeat2009 on Twitter or by becoming a fan of the event on Facebook here.

  • Rockwell
    I would love to use a service like this, but something tells me that any of the eight private companies that I have shares in would have my head on a platter if I publicly announced through SecondMarket that I wanted to sell their shares.

    The lack of discretion involved with using this service combined with the fact that frequently in any sale of shares the company has to be involved with providing information, etc. tells me this is not going to work. Hope it does though...