"Companies that choose to remain private and avoid complying with regulatory requirements waive the stability of public trading in terms of stock pricing and selling activity, as well as value estimation - all activities requiring knowledge and capital resources," NPM - Nasdaq Private Market business development center director Europe Maoiliosa O'Culachain told a FinTech panel at the DLD TLV Technological Innovation Conference 2016 in Tel Aviv yesterday.
He said, "A typical company that comes to NPM is a late stage technology company, which has been around for 9 years, with value of $3.6 billion on average, around 550 employees and which has raised approximately $ 580 million prior to joining the arena."
Nasdaq owns and operates the world's largest trading exchange, with 2,635 companies, providing technology and trading services to more than 3,700 companies with a total market value of more than $10 trillion. In 2016, there have been 62 IPOs on Nasdaq, and Israel is the second foreign country after China in terms of the number of companies listed on NASDAQ.
O'Culachain elaborated on the issues involved in raising private capital without an IPO. "Although technology companies prefer to remain private today, instead of going public and thus being exposed to the public eye and the regulators, they are still in need of an immediate cash flow to continue to grow and develop, so they go to other financing sources such as private individuals and VCs. But raising private money is something you need to know how to do. Companies choosing to remain private thus avoiding having to comply with regulatory requirements, also waive the stability of public trading in terms of stock pricing and selling, as well as accurate value estimation - all are activities requiring knowledge and capital resources. In many cases, engaging the financial and legal aspects weighs on company resources, but cannot be ignored while risking inaccurate valuations, incorrect distribution of shares and options, and damage to the company's liquidity."
In the three years since its establishment, more than 100 private companies joined the NPM arena looking to increase their liquidity. In 2016, the volume of activity is $3.5 billion, with a 20% increase in the number of companies, a 33% increase in the number of companies joining the liquidity program, and an increase of 136% in the volume of capital invested totalling $544 million dollars. Average volume of a single investment activity in the NPM arena today stands at $45 million as of the first half of 2016.
"NASDAQ has identified the growing trend of private funding on one hand, and the problem on the part of private capital raising on the other, and established the NPM (Nasdaq Private Market) in 2014, in order to meet the new need," said O'Culachain. "The goal is to allow private companies a secure capital raising environment, without having to go for an IPO, and while maintaining a high level of liquidity and pricing stability of stocks and options, as they are working before sophisticated investors to obtain growth capital. This is a first of its kind arena in the world, providing private companies with hedging against the instability, which characterizes the capital raising process in the private market, while cutting expenses and making them up to 10 times cheaper compared with conduct outside the arena, as well as providing access to branding and marketing channels, enabling companies to reach a larger number of customers. "
"Many late-stage companies that are on the arena today would have been medium-sized public companies 10 years ago. The number of late-stage transactions rose to 1,000 between 2010 and 2014, i.e. - prior to the establishment of the NPM," concluded O'Culachain.
Published by Globes [online], Israel business news - www.globes-online.com - on September 28, 2016
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