SecondMarket, the leading platform for trading private company shares, seems to be benefiting from growing distrust in the public markets — despite losing its most popular company, Facebook, to the public market.
“We’ve never had so many companies engaging with us,” Barry Silbert, SecondMarket’s CEO, told CNBC Monday.
“They’re looking at what’s happening in the public market with the way stocks [from recent IPOs] are getting pummeled, [and] the way that the management teams getting destroyed in the press,” and want nothing to do with it, he said.
Silbert wants SecondMarket to be the solution for small companies wary of those IPO pitfalls to get liquidity.
The average company trading on SecondMarket has a market cap of $329 million, $108 million in funding, 200 employees, and is 7 years old. The vast majority of investors are institutional (hedge funds, family offices, asset managers) — just 6 percent are accredited individuals.
What's drawing investors now?
The platform’s community bank pilot program, which kicked off earlier this year, is drawing a lot of investor interest, Silbert noted. Video startups like Viddy, Socialcam, and Airtime are another hot category.
And despite the fact that Zynga’s stock has been slammed, companies in the video game industry made up nearly half of SecondMarket’s liquidity events in the first half of the year.
Trading volume in the second quarter grew to a record $176 million, said Silbert. That’s $8 more than the prior quarter, and up 27 percent from the year-ago quarter. The uptick isn’t only thanks to Facebook —the platform’s last trade of the stock was just three days into the quarter.
Does the trading platform deserve blame for inflating Facebook’s valuation, setting it up for a fall post-IPO? Silbert thinks there’s no correlation between companies that trade on SecondMarket and their post-IPO performance. He pointed to the fact that LinkedIn , SecondMarket’s second most popular company, has seen its stock gain nearly 150 percent. And both Zynga and Pandora , which never traded on SecondMarket, bombed after their IPOs.
-By CNBC's Julia Boorstin