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NASDAQ and SharesPost Launch Their New Private Capital Marketplace

Nasdaq Private MarketYesterday Nasdaq (in a press release) and SharesPost (in a blog post) announced the launch of their new private capital market, the NASDAQ Private Market (NPM).

Companies

NPM will operate as an alternative trading system and will offer private companies that qualify for NPM membership the ability to conduct primary offerings (by means of private placements) and control secondary transactions in their securities (by means of structured liquidity programs).

To become a member of NPM a private company will need to meet at least one of the marketplace’s qualification requirements and comply with certain reporting and disclosure requirement. NPM also recommends, but does not require, that member companies comply certain corporate governance guidelines.

Qualification Requirements

Qualification Requirements

Reporting and Disclosure Requirements

NPM member companies will be required to meet certain ongoing reporting and disclosure requirements, including:

  • the provision of audited annual financial statements and unaudited quarterly financial statements to transaction participants;
  • disclosing company information, such as management bios, a description of the company’s business, including significant developments, operations, competition and risks, and capitalization information, annually to transaction participants; and
  • adopting an insider trading policy designed to prevent misuse of material non-public information.

Recommended Corporate Governance Guidelines

NPM also recommends, but again does not require, that member companies adhere to certain corporate governance guidelines, including:

  • having a board of directors that includes at least two independent directors.
  • having an audit committee comprised of solely of independent directors who can read and understand financial statements and which has sole responsibility for engaging and dismissing a company’s auditors;
  • adopting a code of conduct applicable to officers, directors and employees;
  • holding an annual meeting; and
  • reviewing and overseeing related-party transactions for potential conflicts of interest.

Market Participants

NPM is a dealer market, like the NASDAQ Stock Market, meaning that market participants will have to access NPM through a broker-dealer that is a member of NPM.

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