|Industry||Finance and Marketplaces|
|Founded||2004 (as Restricted Stock Partners, Inc.)|
|Founder(s)||Barry E. Silbert|
|Headquarters||New York City, USA|
|Key people||Barry E. Silbert (Founder, Chairman & CEO)|
SecondMarket (formerly Restricted Stock Partners) is an American online marketplace for buying and selling illiquid assets, including auction‐rate securities, bankruptcy claims, limited partnership interests, private company stock, restricted securities in public companies, structured products, and whole loans.
The website was created in 2004.
SecondMarket says it is the world's biggest broker of venture-backed private-company stock by the value of shares traded.
- 1 History
- 2 Markets Trading on SecondMarket
- 3 Investors
- 4 Competitors
- 5 Key Board Members/Advisors
- 6 References
- 7 Further reading
- 8 External links
SecondMarket was founded in 2004 by Barry Silbert originally to address the growing need for liquidity for restricted securities in public companies. Beginning in early 2008, SecondMarket expanded into a number of other asset classes - first auction‐rate securities, then bankruptcy claims, limited partnership interests, structured products (MBS, CDO, ABS), whole loans, private company stock, government IOUs and bitcoins.
In 2007, the company raised an undisclosed amount of Series A financing from venture capital firm Pequot Ventures. In February 2010, the company raised US$15 million in Series B funding to aid its expansion into Asia. In November 2011, the company announced that they had closed a US$15 million Series C round, led by The Social+Capital Partnership. The last round of investment valued SecondMarket at US$200 million, up from a valuation of about US$150 million set in the previous round in February 2010.
The firm's private-company transactions, which totaled $100 million in 2009, quadrupled by 2010 to $400 million. Based on first-quarter results, SecondMarket could broker $1 billion in private-company shares in 2011, taking fees from 3 to 5 percent on each trade (split evenly between buyer and seller). In March 2011, it had 53,000 registered participants, up from 35,000 in 2010, 6,500 in 2009 and 2,500 in 2008.
Markets Trading on SecondMarket
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Restricted Securities in Public Companies
Restricted securities, SecondMarket's initial market, utilizes privately negotiated transactions to provide access to liquidity in the trillion dollar restricted securities market. A privately negotiated sale allows buyers and sellers to trade registered and unregistered securities, pursuant to certain guidelines and conditions of the Securities Act of 1933. Several types of restricted securities trade on SecondMarket:
- Registered and Unregistered Stock
- Affiliate and Control Stock
- Convertible and Preferred Securities
- Public Debt Instruments
- Registered and Unregistered Warrants
- Block Trades (Small- and Micro Cap)
- Portfolio of Securities
- Warrant Management
Auction-Rate Securities Market
As a result of the economic crisis, in February 2008, auction-rate securities (ARS) experienced widespread auction failures that left hundreds of billions of dollars “frozen” in suddenly illiquid auction-rate securities. In response, SecondMarket (then Restricted Stock Partners) opened up its marketplace to the trading of all ARS types including:
- Auction-rate CDOs
- Auction-rate preferred securities (ARPS)
- Municipal auction-rate securities (MARS)
- Student-loan auction-rate securities (SLARS)
Bankruptcy Claims Market
SecondMarket entered into the bankruptcy claims market in June 2008 by acquiring Trade Receivable Exchange, Inc. (T-REX) of Denver, at the time the largest online auction platform serving the bankruptcy trade claims market. A variety of different claim types trade over SecondMarket:
- Administrative Claims
- Lease and Contract Rejection Claims
- Secured Claims
- General Unsecured Claims
- Scheduled and Unscheduled Claims
- Scheduled Priority Claims
Limited Partnership Interests Market
In February 2009, SecondMarket opened its marketplace to limited partnership (LP) interests, which are ownership rights in investment entities such as private equity funds, real estate funds, hedge funds, and fund of funds. Through this market, current limited partners are able to transfer future capital commitments to other investors who are better suited to satisfy the obligations.
- Residential Mortgage-Backed Securities
- Corporate Mortgage-Backed Securities
- Other Asset Back Securities
- Corporate bonds (these structures are also known as Collateralized Bond Obligations or CBOs)
- Banks loans (the structures are also known as Collateralized Loan Obligations or CLOs)
- Credit derivatives
- Other CDOs (these structures are also known as CDO-squared)
- Other specialized debt types
Launched in April 2009, SecondMarket's whole loans market facilitates transactions in a wide variety of residential, commercial and specialty loan types. SecondMarket transacts in both performing and non-performing individual loans as well as entire loan portfolios. SecondMarket facilitates trading in a wide variety of loan types including:
- Residential mortgages
- Commercial loans
- Construction loans
- Consumer loans
- Industrial Loans
- Loan Portfolios
Private Company Stock Market
SecondMarket's market for stock in private companies opened in April 2009 and facilitates transactions in both debt and equity securities in a wide variety of dynamic, high growth private companies. Through SecondMarket, private companies can opt into an organized, controlled private liquid environment that offers early investors and employee shareholders exit opportunity prior to an IPO or M&A event. Numerous high profile companies have traded over SecondMarket including Facebook, Tesla, Zynga and Twitter.
SecondMarket’s government warrant market facilitates transactions in registered warrants (IOUs) issued by state governments. When the state of California issued warrants to its creditors in mid-2009, SecondMarket opened up a market place to facilitate the trading of government IOUs.
The Bitcoin Investment Trust (BIT) is a private, open-ended trust that derives its value solely from the price of bitcoin. It enables investors to gain exposure to the price movement of bitcoin without the challenges of buying, storing and safekeeping large quantities of bitcoins. SecondMarket acts as the custodian and the trust is audited by Ernst & Young.
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SecondMarket closed a series A round from FirstMark Capital (previously named Pequot Ventures) in late 2007. Pequot was the $2 billion venture arm of hedge fund Pequot Capital Management, but in March 2008, it was spun off as a separate business and renamed. Over the past dozen years, the venture firm has opened seven funds, and it currently has $1 billion in actively managed and unallocated capital. The fund focuses on emerging media and advertising, data and analytics and infrastructure startups.
SVB Financial Group
SecondMarket's acquisition of InsideVenture led SVB to become an investor in SecondMarket in October 2009. SVB Financial Group provides financial services to emerging, growth and established technology companies in the life science, venture capital/private equity, and premium wine markets.
New Enterprise Associates
SecondMarket's acquisition of InsideVenture also led NEA to become an investor in SecondMarket in October 2009. New Enterprise Associates (NEA) is a venture capital firm specializing in investments in venture growth equity at all points of developments, with a 60 percent focus on seed and start-up stage companies.
SecondMarket secured a series B round from Horizons, the investment arm of Chinese business magnate Li Ka-shing, in January 2010.
- The Private Equity Exchange www.peqx.com
- Exhilway private capital market
- Campbell Lutyens
- Cogent Partners
- GS TRuE
- GATE Technologies
- NASDAQ Portal Alliance
- Probitas Partners
- Zealous ATS
Key Board Members/Advisors
- Barry E. Silbert is the Founder and CEO
- Bill Seidman was a Senior Advisor to SecondMarket from 2008 until his death on May 13, 2009.
- Larry D. Lenihan, Jr. is the Founder, CEO, and Managing Director of FirstMark Capital.
- Chamath Palihapitiya is the Founder of The Social + Capital Partnership
- "About Us". SecondMarket. Retrieved June 18, 2010.
- Bloomberg Markets, June 2011, pp. 33-44.
- "SecondMarket,Inc.". BusinessWeek. 2009-12-10. Retrieved 7 December 2009.
- "SecondMarket Starts First U.S. Trust for Bitcoin Virtual Money". Bloomberg. 2013-09-26. Retrieved 27 September 2013.
- "SecondMarket Establishes New Bitcoin Trust for Accredited Investors". Entrepreneur. 2013-09-26. Retrieved 27 September 2013.
- Restricted Stock Partners Secures Funding From Pequot Ventures. September 19, 2007
- "SecondMarket Eyes Asia Expansion". CNBC. Retrieved June 18, 2010.
- Epsom, Rip (2011-11-01). "Former Facebook VP Chamath Palihapitiya Invests $15 Million In SecondMarket, Joins Board". TechCrunch. Retrieved 2013-04-29.
- Ante, Spencer (2011-11-02). "SecondMarket Gets Its Own Funding". The Wall Street Journal. Retrieved 2013-04-29.
- Thirty-One Visionary Companies Selected as Technology Pioneers 2011
- Anderson, Jenny (2005-05-28). "Market Place; Seeking Unlimited Success From Providing a Market for Restricted Stock". The New York Times. Retrieved 7 December 2009.
- Zuill, Lilla (2007-09-19). "Restricted, Distressed Securities Get E-marketplace". Reuters. Retrieved 7 December 2009.
- "Liquidating Frozen Auction-Rates". CFO.com. 2008-04-29. Retrieved 7 December 2009.
- Restricted Stock Partners Acquires T-REX "Restricted Stock Partners Acquires T-REX". dBusinessNews. 2009-06-09. Retrieved 7 December 2009.
- "Private equity investors flock to sale platform". Financial Times. 2009-02-24. Retrieved 7 December 2009.
- Demos, Telis (2009-04-14). "Trading the untradable pays off". CNN Money. Retrieved 7 December 2009.
- "With Private Trades, Venture Capital Seeks a New Way Out". New York Times. 2009-04-22. Retrieved 11 January 2010.
- "How Can Twitter And Facebook Employees Cash Out Now". Washington Post. 2009-06-23. Retrieved 7 December 2009.
- "California IOUs set for trade". dBusinessNews. 2009-06-16. Retrieved 11 January 2010.
- "Crunchbase FirstMark Capital". Cruncbase. 2009-11-13. Retrieved 11 January 2010.
- SecondMarket to Launch Student-Loan Securities Platform. The Wall Street Journal, March 1, 2013
- SecondMarket Providing A Platform For Frozen CDOs. Business Insider, September 3, 2009
- Wall Street Betrayal Seen in $4.8 Billion Company Debt Losses. Bloomberg, August 28, 2009.
- Auction-Rate Yard Sale. The Wall Street Journal, August 22, 2009.
- Restless Workers in Silicon Valley Seek Ways to Cash In Early. The Wall Street Journal, August 21, 2009.
- No IPO? Seek an Exit on SecondMarket. MarketWatch, July 30, 2009.
- Websites give buyers chance to invest in a company before IPO. USAToday, July 21, 2009.
- Investing in Startups. Business Week, July 16, 2009.
- California IOUs set for trade. Financial Times, July 15, 2009.
- Investors eye IOUs. San Francisco Chronicle, July 7, 2009.
- Waiting for IPO: SecondMarket in the meantime. The Deal, June 30, 2009.
- Market for illiquid assets. CNNMoney, May 5, 2009.
- How Can Twitter And Facebook Employees Cash Out Now; SecondMarket Offers New Marketplace. The Washington Post, April 23, 2009.
- With Private Trades, Venture Capital Seeks a New Way Out. The New York Times, April 23, 2009.
- SecondMarket Launches Private Company Marketplace. Reuters, April 23, 2009.
- Trading the untradable pays off. Fortune, April 14, 2009.
- SecondMarket Launches QMS Practice. DowJones, February 25, 2009.
- PE fund sales get their own market. Reuters, February 24, 2009.
- Madoff investors may be able to trade their claims. Reuters, February 24, 2009.
- After Reversal of Fortunes, City Takes a New Look at Wall Street. New York Times, February 22, 2009.
- Out of the Rubble, a New Market. Institutional Investor, February 13, 2009.
- SecondMarket Enters New Territory. Financial Times, December 11, 2008.
- Seidman Returns to Toxic Asset Business. IDD Magazine, December 15, 2008.
- Illiquid securities to get new market. Pensions & Investments, November 24, 2008.
- Bankruptcy bucks. Denver Business Journal, June 13, 2008.
- Holders of Auction-Rate Debt Have Choices, but Few Solutions. The Wall Street Journal, June 12, 2008.
- New exchange offers trading of bankruptcy claims. Reuters, June 9, 2008.
- Auction-Rate Securities: Out of Luck. BusinessWeek, May 27, 2008.
- Secondary bids value auction debt 5-25 pct below par. Reuters, April 2, 2008.
- Electronic trade to start for auction-rate market. Reuters, February 25, 2008.
- Pequot Takes Minority Stake in Restricted Stock Partners. alarm:clock, September 19. 2007.
- Restricted Stock Finds its Market. Investment Dealers' Digest, January 1, 2007.
- Seeking Unlimited Success From Providing a Market for Restricted Stock . The Wall Street Journal, September 28, 2005.