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Secondmarket, a new New York-based electronic market place for privately-owned companies and other assets, has recorded $100 million in sales of Facebook shares over the past 12 months. In this video interview, secondmarket chief strategy officer Jeremy Smith says that some there has been $250 million in transactions over the company's electronic trading system over the past 12 months, and Facebook shares comprise 40 percent of the sales volume. The shares are sold to qualified investors.
Transcript
Jeremy Smith on Secondmarket's Facebook Stock Sale Beet TV Interviewer: Jeremy so tell us about the opportunity to buy and sell what had been private. Let’s say venture investments? Jeremy Smith: Yeah it’s actually been an incredible of all of the asset classes that trade over second market are private company stock market has really been the fastest score and most exciting ones so essentially holders of shares and private companies like Facebook or Zynga or LinkedIn or Twitter. They have the ability to sell their shares in those companies over a second market even though those companies are still private. Interviewer: Well and how does that work I mean not to get too deep into it the buyer and the seller register or what is the market place? Jeremy: Yeah so well anybody can sell but the only people who can buy are what are called accredited investors or qualified institutional buyers. In other words wealthy sophisticated investors and all that happens if you’re upholder of private company stock whether you’re an ex employee or an early angel investor or a venture capitalist who invested in the firm you have the ability to sign up for second market it takes 60 seconds and essentially list your shares for sale. Now we have both an electronic trading platform where buyers can see what’s available but we also have market specialists these are experts in private company stock sales who helped the buyers and sellers. They help educate them, guide them and really facilitate transaction so that you can sell your stock. Interviewer: Okay so how’s the market these days for the—I mean is it cyclical that depends strictly on the fundamentals of a company. Is it sort of are there any trends you’re seeing? Jeremy: There are a couple of things so first question is actually going very well we launch the private company stock market just a little over a year ago and in that year we’ve done approximately a quarter billion dollars in private company stock transactions. Last year we did about 100 million in total and just in the first quarter of this year there was around 130 million dollars in private company stock transactions done so the growth has been absolutely tremendous and early on the transactions were taking place in a living number of companies. In fact for the first few months it was all Facebook stock but now we’ve done transactions in several dozen start up companies. Now the theme is they’re all successful. This isn’t a junkyard for startup companies that don’t work. These are really good start up companies but they range from household named companies again like Facebook, Zynga, Twitter, LinkedIn to companies that are very, very good. Their just not well known and for those companies that are good but not household names they just need to provide a little bit more information, a little bit more transparency because people aren’t going to buy off of the brand name like they do with some of those other more well known companies. Interviewer: Okay so for Facebook what would they do, would they sort of say that they’re going to put a certain amount in the private market place or and is there evaluation said by the market place or how does it work? Jeremy: Usually the way it works is you’ll have a specific seller so it won’t necessarily be Facebook itself but you’ll have an ex employee of Facebook who maybe has 500,000 shares and they’ll say well I no longer work for Facebook I would like to get some liquidity so I can buy my house or send my kids to college so I’m going to listen to my shares on second market and then what happens is the market actually sets the price so second market doesn’t do any evaluation or anything like that it’s the bidders. The buyers who say I’m willing to pay $40 a share for facebook. Well I’m willing to pay 42, 45, 47 in the high bidder is the one that wins the sale for the shares, and then the buyer will put the cash in Escrow second market. The seller will put the shares in Escrow and then when both Escrow accounts are filled they exchange hands and that way no one has left holding the bag by saying wait I gave away my cash now where is my stock in Facebook. It’s very safe, secure process. Interviewer: What is a share price of facebook now according to your market place if you can— if there is something that you could like look on your applications and see? Jeremy: There is a note I absolutely love to tell you but one of the key probably the most important part of our strategy is to make sure that we work with the company and that we do this in accordance with how they want things done so that the secondary market and shares for their companies happen in a way that they are comfortable with and so as you can imagine one of the first things companies tell us as we’re working with them is don’t publicly mention the stock price of our private company stock so I would love to give the answer unfortunately I can’t and you know in the spirit of being friendly to our company customers. Interviewer: How much does facebook stock you know sales, training is part of your overall run? Jeremy: Well of the quarter billion dollars in private company stock transactions that had been done over second market about 40% of that is facebook. The other or I should say the next 25 to 30% is Zynga, LinkedIn Twitter those sorts of brand name companies and then the remaining I guess the math will workout about 30% or so 30-35% are the a couple dozen other companies again that are very successful just not the household names. Interviewer: Thanks very much. Jeremy: My pleasure.
