How to Buy Stock in Private Companies

Wednesday, 1 Dec 2010 | 2:34 PM ET

For the first time, investors have access to private companies before they go public, Barry Silbert, founder and CEO of SecondMarket, the largest secondary market for alternative assets, told CNBC on Wednesday.

"It's no longer the pinnacle of success to be a public company," Silbert said.

For that reason, he launched a marketplace that allows investors to buy a piece of these private companies.

"There was never an opportunity to learn about these [private] companies, study these companies and buy the stocks," Silbert said.

Take Groupon, reportedly in talks to be acquired by Google for $6 billion. "What a success story: the company is a couple of years old, generated 3,000 jobs, $5 billion-plus in value," he said.

Betting on Private Companies
Barry Silbert, CEO of SecondMarket, reveals how you can buy into some of the hottest non-public companies.

"On SecondMarket, over the last two quarters, it [Groupon] was the the most requested stock for people to buy," Silbert said.

"Unfortunately, there wasn't a lot of shares out there," Silbert said, adding, "employees did not get a lot of options that have vested so far"—it typically takes about 4 years for employees' options to vest.

And a lot of people were just betting big, according to Silbert, wanting a big exit—something Groupon may indeed get if it's acquired by Google.

Companies go public for liquidity, to raise capital, to have a currency and for branding, Silbert said, adding, "The secondary market (the private market) can achieve all of that."

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