Forbes has forecast that the private securities market will hit a record £7 trillion this year and grow to a staggering $30 trillion by 2030In a new ongoing series of investor webinars, Rialto Markets shares thought leadership about the new era and how the company is applying bespoke financial infrastructure and technology to serve it. *If you would like to attend the next in the series of investor webinars on Wednesday, December 1st, 1 PM EST please go to the free pre-registration page, here.
Rialto Markets CEO and Co-founder Shari Noonan has said: “The US private securities market is seeing exciting high growth private companies crowdfund their ambitions, while investors are joining this revolution in their droves.”
Noonan and Rialto Markets COO and Co-founder Joel Steinmetz have also shared news that their company would enter the evolving market shortly by announcing its own $5 million Regulation CF raise via the NetCapital crowdfunding site, enabling direct investment in this pioneering broker dealer and its platform solutions for this market.
This $5 million will go towards supporting company expansion and its hi-tech FINRA registered, and SEC regulated Alternative Trading System (ATS) – one of the very few approved and available to serve the new investor market now unfolding. Shari Noonan told recent attendees how the investment norm used to be a small number of public companies traded on the likes of the New York Stock Exchange or Nasdaq, but far more of these exciting companies are now choosing to stay private longer. The US has 27 million private companies but just 4,200 stock market listed public companies – half that of 1995 – yet only 1% of private companies are currently traded on a regulated ATS and this market is set for exponential growth. Until recently, these exciting private markets did not have the infrastructure or secondary market trading platform or technology for investors and private company issuers to realize value and liquidity early on by having the ability to cash out some of that value.
Shari Noonan said: “Back when Microsoft, Amazon and Google went public, they quickly delivered returns of 340%, 500% and an astounding 3,900% in the first 24 months – amazing returns for early-stage investors. “But companies now choose to go public much later, partly due to cost and the flexibility of staying nimble and fast moving, resulting in a very different risk – return profile. Since going public, Uber for instance is up just 7% over the past 31 months; Airbnb up 39% in the past 11 months; and Coinbase up 3% in the past eight months. “It highlights why we are so passionate about opening up private markets, but staying within a strong regulatory framework, to allow retail as well as accredited investors to participate in early-stage high growth private companies – the next Uber, Airbnb or Coinbase.
The JOBS Act
“The JOBS Act – effective from 2016 – paved the way via crowdfunding such as Regulation CF or Regulation A+, which is forecast to double in size this year alone. “In tandem, private company issuers are benefitting further by building their own-highly engaged communities of investors, providing mass support to the company, instead of one or two investors driving the company’s direction – often enjoying the bulk of the eventual profit too.
“For the company, this builds their own investment community, driving advocacy and engagement in what we call the power of the pack or herd versus having a lone wolf investor to support you.”
Noonan emphasized that investors wanted to know they could quickly liquidate their capital and any returns quickly, maybe to afford putting a son or daughter through college or replace a car – nearly 70% of investors cite illiquidity of private markets as a barrier to entry.
Both issuers and investors also need an easy route through the regulations and infrastructure of this evolving private securities marketplace. Rialto Markets’ response is to deliver its strategy on three fronts.
“In the primary market, Rialto Markets offer issuers a self-hosted solution to manage their capital raise,” said Noonan. “Because private companies want to control the branding and messaging – in accordance with securities regulations – and own the data yielded by their digital marketing crowdfunding campaigns, often a significant part of the capital raise budget.
“Secondly, our regulated ATS will enable investors to monetize their investments earlier, and finally, Rialto Markets integrates with other financial marketplaces to offer our ‘white label’ solution: partners can use our pioneering trading infrastructure and technology under their own branding to allow their clients to access secondary trading.
“Why don’t others create their own ATS? Because it’s a long road, one we were only able to take after the management team’s many combined decades of Wall Street experience, plus years of process to ensure our ATS met regulations imposed by FINRA and the SEC to protect issuers and investors.
“The benefits are many: for private company issuers it means a less expensive monetization mechanism not dependent on a corporate capital formation event, such as an IPO or acquisition. “For investors it means greater access and opportunity, and everyone benefits from a vibrant new secondary/private trading market that, ultimately, will outstrip established public ones like Nasdaq and the NYSE due to the size and the scale of private securities.”
Noonan said Rialto Markets is already proving these points, having just successfully managed a successful Regulation CF raise for the exciting electric vehicle innovator, ATLIS, raising almost $5 million from 4,100 investors in just six weeks. The company is now closing out on $200 million of investment in nine high growth private companies, including specialist real estate investment fund Mission First Capital and Digital Twin tech pioneer Cityzenith, and has recently signed contracts for $600 million more, for which Rialto Markets earns success fees charged on the amount of capital raised.
But there were also new private market options such as trading fractionalized assets, often called NFTs (non-fungible tokens). Fractionalization – division of an asset’s ownership – enables investors to participate in assets they don’t want to own or invest in outright, such as fine wine, art, or classic cars. Noonan said it all added strength to a private securities market set to be worth £7 trillion this year, but forecast to grow to $30 trillion by 2030, according to Forbes.