(Reuters) - Liquidnet, a U.S. venue where institutions anonymously trade public stocks, is expanding into trading shares of private and pre-IPO companies such as Facebook and Twitter that may want to avoid the costs and uncertainty of volatile public markets.
The move, announced on Monday, pits the venue against private exchange SecondMarket for a market that Liquidnet said could grow to some $7 billion in value this year, and that has come under regulatory scrutiny.
Liquidnet is one of the more successful “dark pools” because they can swap larger blocks of stock without tipping off the wider marketplace to their intentions. Hedge, pension and mutual funds that trade on Liquidnet will now be able to purchase shares of unlisted companies, the company said.
The company hired Lou Kerner to spearhead an effort to work with companies interested in offering their shares for trading, though it did not say which, if any, companies agreed to such deals. Kerner was vice president of equity research at Wedbush Securities, covering social media and e-commerce.
Technology companies such as Groupon have been testing the waters in the private markets, particularly at SecondMarket and rival SharesPost, to derive approximate values before possibly doing an initial public offering (IPO).
IPOs on the New York Stock Exchange or Nasdaq can take years and require great cost, only to be delayed when markets heave up and down as they have in the last few months.
The private venues offer wealthy investors shares of companies before an IPO, raising some criticisms about equal access and questions about accountability.
The Securities and Exchange Commission is studying the emerging market. It is unclear what restrictions the securities regulator could put on SecondMarket and others.
Reporting by Jonathan Spicer; Editing by Derek Caney