SecondMarket, founded in 2004 as Restricted Stock Partners, has launched a new online secondary market for trading shares in private companies. Among the first to call, the company told the *New York Times*: employees from Twitter, Facebook, Glam Media, LinkedIn, and Tesla Motors. The company has operated markets for illiquid assets since 2004, including restricted public stock and bankruptcy asset awards, but this is its first marketplace focused on shares of private companies. The addition brings the total number of online marketplaces operated by the company to seven.
To be sure, it’s unclear if there is any demand for shares of private companies currently given the poor state of the economy. Also, a lot of work has to be done to prevent fraud and other legal issues. SecondMarket must first determine if the seller is an actual shareholder, than vet shareholder agreements to determine if there are clauses preventing a sale of stock by shareholders in such a marketplace. In addition, the investments are inherently risky given the lack of public information about private companies, which could also hamper demand.
Still, as we noted earlier in the week, venture dollars have dried up in the past couple quarters and valuations have come down considerably — the result being less exit opportunities for startups and likely fewer startups to invest in. Investors and shareholders alike may find the marketplace a useful alternative, but only time will tell.