For companies looking to forestall a move to go public, there’s a new alternative trading platform that just came out of stealth mode and is giving start-ups a way to sell private shares. Xpert Financial just announced today that it has gotten approval by the SEC and the Financial Industry Regulatory Authority to open an electronic trading platform that will serve as a middle ground for companies looking for capital and liquidity but without the requirements of going public. This could allow companies to stay private longer and further erode the IPO market as companies amass the capital to scale while maintaining their independence.
Xpert Financial, a start-up with a personal investment from Tim Draper of Draper Fisher Jurvetson, has been working for 1 1/2 years to gain the approval of regulators, who are increasingly scrutinizing secondary markets like SecondMarket and SharesPost. Those services match investors with private shareholders, often ex-employees of a start-up, who are looking to cash out. Because of companies such as SecondMarket and SharesPost, start-ups like Facebook, Twitter and others have risen in value by 54 percent since June, according to a report this month by Nyppex LLC, a private equity advisory firm. The private companies, however, do not participate in the selling of their shares.
Thomas Foley, CEO of Xpert Financial said companies who list themselves on Xpert Financial will be able to raise up to billions of dollars through what he calls an XPO or Xpert Private Offering. The offering would allow the company to choose who to sell to and would enable it to keep its shareholders count under 500, the threshold that requires a company to disclose more financial information publicly. For investors, Xpert Financial’s system will allow them to get a look at a company’s financial information, something that is missing from existing secondary markets.
“A company can set a goal for capital raised or shares sold and you can see a company growing up with us and graduating to the New York Stock Exchange or getting acquired,” said Foley. “But there’s definitely not a forced timeline to go public now. It’s up to the company to say when it’s the right time.”
This could undermine any rebound in the IPO market. In 2009, there were 119 IPO filings, but that number increased to 263 in 2010, according to Renaissance Capital. Late-stage funding for big start-ups has also helped some of them delay going public. With XPO in their tool kit, start-ups can cash out some investors who may have pushed for an IPO in the past.
Foley said the company has already started pre-registering with companies and expects to have its first XPO in mid-first quarter.
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