Nasdaq unit explores private IPOs for startup stakes

Nasdaq Private Market is having conversations with several large VC and private equity firms about providing them with opportunities to divest stakes in portfolio companies at regular intervals, as the market for IPOs isn’t yet fully open. — Bloomberg

NEW YORK: Nasdaq Inc’s private market subsidiary is seeking to be the first in the United States to offer companies the option of holding so-called private initial public offerings (IPOs), giving venture capital (VC) and buyout firms more options to realise the value in their portfolios.

Nasdaq Private Market is having conversations with several large VC and private equity (PE) firms about providing them with opportunities to divest stakes in portfolio companies at regular intervals, as the market for IPOs isn’t yet fully open.

“Both VCs and PE are all frankly grappling with the same liquidity challenges for many of their larger portfolio holdings,” Nasdaq Private Market chief executive officer (CEO) Tom Callahan said.

“One of the largest PE firms in the world recently told me that it’s causing them to fundamentally rethink their whole business model of relying on mergers and acquisitions or IPOs as their only path to liquidity.”

Nasdaq is eyeing the first such deals in the second half of 2024, though it doesn’t have concrete plans with regards to the companies involved or the timing, Callahan said.

The traditional IPO market has frustrated potential candidates and their owners, bouncing back haltingly after a two-year drought.

Companies have raised US$17.2bil on US exchanges this year, about 65% above the same period in 2023, data compiled by Bloomberg showed.

But with US$3.2 trillion tied up in aging, closely held companies globally as of the end of last year, according to Preqin data, asset owners are looking for new ways to exit their stakes.

To be sure, the concept of a private IPO – a kind of auction process for stakes in a closely-held company – isn’t new.

Nordic private equity fund manager EQT AB has floated the idea of private stock sales of its portfolio companies over what its CEO Christian Sinding described as an industry-wide problem of not being able “to do enough exits”. — Bloomberg