SecondMarket gave CNBC a first look at its 2011 trading results of private company shares and social media continues to be hotter than ever.
With Congress evaluating revising the “500 shareholder rule,”to enable companies to stay private longer, more investors are jumping into this platform for tapping into private company value. SecondMarket is big business, with $585 million in trades last year, up 55% from $360 million in 2010 and just $100 million in 2009. And this business was curtailed by limited shares – there was $6.1 billion in buy-side demand last year.
There’s no question that expectations that Facebook is preparing to file its S-1 is driving investor interest in the space—sixty percent of trades were for consumer web and social media companies. SecondMarket won’t disclose exact trades, but it reveals which companies investors are interested in, or “watching.” Usual suspects Facebook, Twitter and Foursquare top the “most watched list.” They’re followed by cloud storage company Dropbox, Yelp, Gilt Group, Hulu, and mobile payments company Square. The top ten is rounded out by Groupon rival Living Social, which is backed by Amazon and music service Spotify.
So which company is the next big thing? The fastest “rising star” is Pinterest, a virtual pin board site which allows users to share photos from around the web. The next two rising stars are both health care companies—medical records service Practice Fusion and online appointment booker ZocDoc. New on the scene, in terms of investor interest, is flash sale site Fab.com.
And SecondMarket isn’t just for startups.Bloomberg, Bose, Cargill and Levis top the list of “most-watched” non-venture backed companies. Food and beverage companies dominate the list of non-venture backed ‘newbies’ – companies that saw a surge in interest in the fourth quarter. In-n-Out Burger started the quarter with fewer than 10 watchers and ended with 75, followed by three breweries: Dogfish Head, Brooklyn Brewery, and D.G. Yuengling & Sons.
Who’s buying and selling? The vast majority—79 percent – of shares are sold by former employees. And institutions, rather than individuals, are doing nearly three quarters of the buying. Asset managers did the most trades by dollar value—31.3 percent of deals in 2011. Next in line: Family offices, with nearly 30 percent of trades, then Hedge funds, with nearly 17 percent, and then secondary funds with almost 9 percent.
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