By Dara Albright
Following the SEC’s 568 pages of proposed rules for Title III Crowdfunding, Crowdnetic’s NowStreet Wire released a comparison chart highlighting the benefits and drawbacks of selected crowdfinance offerings including PIPRs (“Private Issuers Publicly Raising”), proposed Title III Crowdfunding, Intrastate Crowdfunding and Registered Crowdfunding (see:http://nowstreetjournal.com/2013/10/30/comparative-analysis-of-crowdfinance-offerings/).
In addition to rousing a great deal of interest in Wall Street’s latest corporate finance structures, the chart led to a number of discussions and inquiries relating to liquidity and secondary transactions. As a result, NowStreet Wire is pleased to provide the industry with a subsequent chart analyzing the resale options for private stock obtained through crowdfinance offerings, along with a roadmap to a practicable secondary marketplace for privately-held shares.
Although pertinent to the construction of a secondary exchange, the ability to resell private stock is only part of the equation. The quintessential components will lie in the procurement of the underlying infrastructure. In order for a secondary marketplace for private shares to effectively flourish, it must possess dependable settling and clearing functionality, reliable certificate tracking, issuer transparency, and an ecosystem of support from brokers, market makers, impartial research analysts and most importantly, from the mounting “crowd” of retail investors.
Without this stable foundation, the marketplace for private shares will remain as disorganized and fragmented as it was during the frenzied weeks leading up to Facebook’s IPO (read: http://nowstreetjournal.com/2012/01/09/chasing-spreads-in-private-company-secondary-transactions/).
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