“We have created an internal equity program as part of our efforts to provide long-term incentive compensation for our highest-performing employees,” Mr. Porterfield said. “The program that we have created further aligns compensation with the long-term performance of our firm, which is a direct reflection of the value we deliver to our clients.”
Less than 15% of the companies whose shares are being sold and less than 5% of the shares purchased on SecondMarket were financial services firm, according to the company's quarterly report for the period ended Dec. 31.
Venture capital funds were the most active buyers, making up more than 40% of complete trades. Close to 20% of the buyers were high net-worth investors
SecondMarket is one of four firms offering private share trading. The others are: Xpert Financial Inc., which has not yet started trading; SharesPost Inc., an online bulletin board for buyers and sellers; and Nasdaq OMX's PORTAL Alliance LLC, which trades only 144A or private company share transactions among qualified institutional buyers with more than $100 million in assets.
A spokesman for Expert Financial said officials will not disclose registered users.
SharesPost's 65,000 members include venture capitalists, angel investors, mutual funds, accredited individuals, family offices and company employees, CEO David Weir said in en a-mailed response to questions.
“When we launched in June, the market was just beginning, and each of the market participants were each trying to figure out if it would take off and how it might impact them,” Mr. Weir said. “Now people understand this market is here to stay — that it is an inevitable reaction to the desire among a broad universe of investors who desire access to the most interesting growth company investment opportunities and the need for early stage investors and employees for liquidity.”
Goldman Sachs had its own exchange to trade private 144A shares, but no traditional money managers listed on the exchange. Goldman Sachs' exchange had only two listings: Oaktree Capital Management LP and, before its initial public offering, Apollo Global Management. Goldman Sachs was one of eight founding banks that started PORTAL Alliance, and bank officials decided about a year ago that future listings would be on PORTAL Alliance.
At SecondMarket, there are a “handful” of firms trading on SecondMarket, Mr. Smith said, declining to say how many or to identify the firms. He would say only that they are a mix of private equity and traditional firms.
SecondMarket is making a big push to attract larger, established private businesses including community banks, money managers and other private companies. Those efforts have been “well-received,” Mr. Smith said.
The allure of private markets is allowing a company to create private shares to attract employees, yet remain private. These shares do not trade constantly. They trade during specific windows, Mr. Smith said. SecondMarket gives each company control over who can buy, who can sell, how much can be sold, when the market will open and what level of information will be revealed, Mr. Smith said. n