SharesPost Boosts Transparency With Bloomberg Deal

NEW YORK ( TheStreet) -- Secondary market exchange operator SharesPost will begin including its pricing information on Bloomberg terminals in a move that could open up the market for trading shares of privately held companies to new investors.

Starting on Wednesday, Bloomberg subscribers will be able to view both real-time and historical pricing for shares of hot private companies like Facebook, Twitter and Etsy.

SharesPost CEO Dave Weir said including this data on Bloomberg terminals will benefit investors looking for more efficient ways to access pricing information for private companies. Previously, potential investors -- accredited individuals with a net worth of at least $1 million -- had to register for a SharesPost account and log in through its website to gain access to pricing data.

"You really can't have a vibrant healthy marketplace without giving an adequate amount of content to make investment decisions," Weir said in an interview.

Boosting investor access to private company data through Bloomberg terminals will likely increase the volume of trades, said Sam Hamadeh, the founder of PrivCo, which also provides data on private companies.

"Trading shares of private company stock is set to explode in the next few years but the exchanges are still in their infancy," he said.

Around two-thirds of investment activity on SecondMarket, for example, is completed by accredited individuals, meaning there's still plenty of room for other types of investors to tap into the space.

SharesPost is likely targeting institutional investors through its partnership with Bloomberg, as they comprise the majority of users on the company's more than 300,000 terminals.

"Bloomberg users are virtually all institutional investors so it will open up the market beyond just doctors and lawyers," Hamadeh said. "It's a game-changing relationship."

Institutional investors are increasingly looking for exposure to hot technology companies.

Mutual fund company T. Rowe Price sank $190.5 million into Facebook in April and has also made investments in pre-IPO Groupon ( GRPN) and Zynga.

Hedge fund Tiger Global Management has also invested in Facebook and Zynga, as well as ticketing and event management service Eventbrite and online eyeglasses retailer Warby Parker.

Opening up the market to more institutional investors could boost the trading of private company shares to as much as $6 billion this year, SharesPosts' Weir said.

It may also grow even further if new legislation to raise the shareholder limit for reporting requirements from 500 to 2,000 passes through Congress. This would mean private companies would no longer be forced to go public if they exceeded 500 shareholders, as Google ( GOOG) was obligated to do in 2004.

Staying private is an increasingly popular alternative for companies because of increased government regulation like Sarbanes-Oxley and choppy public markets.

"The public markets have become less and less interesting and are very volatile," said Larry Tabb, founder of capital markets-focused research firm Tabb Group. "This disadvantages small and mid-sized companies and it becomes harder for shareholders to find liquidity."

Yet some believe exchanges for private company shares aren't the answer -- despite greater transparency from SharesPost and other private exchanges -- the market is still too opaque.

"The challenge is we're in an environment where there's lots of excitement around certain companies so people may throw caution to the wind and forget to do the proper diligence," said Sergio Monsalve, a principal at Norwest Venture Partners. "There are still a lot of unanswered questions about the secondary markets ... it could turn out not to be such a happy ending in some cases."

SharesPost and its rival SecondMarket both emerged in 2009 to help employees and insiders unload their shares of privately held companies to investors.

In a sign of investor enthusiasm for the space, SecondMarket last week nabbed $15 million in funding, valuing the exchange at $200 million.

SecondMarket private stock transactions in the first three quarters of 2011 totaled $435 million, a 73% increase over the same period last year.

SharesPost declined to disclose the amount of transactions it has completed this year, but expects to conduct over 1,000 trades this year, up from just several dozen in 2010.

-- Written by Olivia Oran in New York.

>To follow the writer on Twitter, go to http://twitter.com/Ozoran.

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