Goldman Sachs caused a stir in early January when word broke that it would invest $450 million in Facebook. Even more intriguing, though, was the news that Goldman would create a fund through which its clients could buy some $1.5 billion worth of shares in the fast-growing, privately held social-networking company.
But you don’t have to be a well-heeled Goldman client to get in on Facebook or other hot, privately held companies before they go public. Two Web sites — SharesPost.com and SecondMarket.com — provide electronic platforms that allow qualified investors to buy shares from company insiders and employees who want to cash out before a company goes public. By offering a way to enter an area previously open only to Wall Street’s elite, “we democratize the opportunity to invest in private company stocks,” says David Weir, chief executive of SharesPost.
Since 2004, SecondMarket, a registered brokerage, has been offering a marketplace for alternative investments, such as asset-backed securities, mortgage securities and limited-partnership interests. Last year, $400 million worth of transactions closed on SecondMarket, up from $100 million in 2009. At present, 40 private stock issues trade on the platform, with Facebook, Twitter and LinkedIn the most active.
SharesPost, founded in June 2009, is not a brokerage but works with brokers to manage transactions. Currently, it lists 150 privately held companies, with the total number of buy and sell orders available (not actual trades) worth roughly $400 million.
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