How the private company shares market has developed in 2012

The news surrounding Twitter’s latest secondary transaction shone some light on the current state of the private company shares market. Predictably, the market has moved away from unsupervised transactions between individual shareholders and investors and towards large ‘arranged marriage’ type of transactions where the company builds a relationship with a large investor who then puts out a tender offer to employees.

Twitter build a relationship with Blackrock, presumable ‘opening the kimono’ and granting detailed financial information, determined a fair price for it’s stock and finally let Blackrock make a tender offer to it’s employees. This is very different from the pre-Facebook IPO ‘bubble’ in private stock, when shares were traded in an opaque market where prices were set more by hype then financial information. The post-IPO fall in Facebook shares However, has dampened enthusiasm for private start-up stock among private investors. What Twitter has done is in fact not different from what Facebook itself did in earlier days. Before the 2011 frenzy in private stock, .

Private company’s and their investors, trying to avoid the headaches that unsupervised private transactions gave them, have taken back control over their shares. Expect to see more of these pre-arranged transactions were large and sophisticated buyers supply liquidity to early employees via tender offers, after having first gone over the books and build a relationship with the company in question.


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