New York''s Nasdaq stock exchange''s new online marketplace for private placements, Portal, has won approval from the Securities and Exchange Commission (SEC), the final hurdle to launching the new electronic marketplace. To open on 15 August, the new bourse would open trading in private equity and venture capital vehicles for small retail investors. The Portal platform is an electronic marketplace for stocks issued under SEC rule 144A, which lets companies sell shares to institutional buyers without government oversight.
Nasdaq executive vice president John Jacobs said that the exchange plans to create new indices based on securities traded in the new market. An index based on private equity or venture capital securities would allow financial services firms to create exchange-traded funds or other tracking instruments for retail investors. It is intended to improve the efficiency and transparency of the private placement market, thereby encouraging capital formation.
However, any such securities can be issued only once the new marketplace has demonstrated sufficient trading volumes. Jacobs, who invented the QQQ exchange traded fund known as the Qube, said the marketplace will let investors and company founders buy and sell traditionally non-liquid investments like venture capital and other forms of private equity.
For venture capital and private equity firms, this could be a first-stage partial exit forum. Nasdaq is marketing Portal to underwriters, who help companies issue shares; to institutional traders, who would be the main potential investors in the marketplace; and to companies, which might want to use Portal to raise money. Portal could also find clients in foreign companies that want to raise capital in the United States, but don''t want the expense of listing on an exchange.
The new web platform is a nodification of Nasdaq''s earlier Portal system, launched in 1990. Portal will be for equities initially; debt securities will be introduced in the fourth quarter of this year. Nasdaq estimates that in 2006, the total of debt and equity capital raised through 144A transactions was more than $1 trillion.
The Portal market has in seven months of this year designated more than 1,700 144A equity and debt securities as Portal securities, compared to nearly 2,700 in the whole of 2006. Among the companies that have raised capital using the Portal market this year and last are Archer Daniels Midland, Adidas of Germany, the Bank of China, Roseneft from Russia, Korea''s Samsung, Australia''s Telstra, and India''s UTI Bank, now renamed Axis Bank.
Since certain Portal issuers may wish to employ shareholder-tracking procedures to avoid exceeding shareholder thresholds that would require registration with the SEC as a public company, Nasdaq is collaborating with third-party providers to incorporate an industry-wide shareholder tracking solution into Portal.
Nasdaq is the largest US equities exchange, with approximately 3,200 companies. On average, it trades more shares per day than any other US market. Starting off as a ''new economy'' exchange, it mainly lists companies in the technology, retail, communications, financial services, transportation, media and biotechnology sectors.