Jeremy Smith on Secondmarket's Facebook Stock Sale

Beet TV

Interviewer: Jeremy so tell us about the opportunity to buy and sell what had been
private. Let’s say venture investments?

Jeremy Smith: Yeah it’s actually been an incredible of all of the asset classes that trade
over second market are private company stock market has really been the
fastest score and most exciting ones so essentially holders of shares and
private companies like Facebook or Zynga or LinkedIn or Twitter. They
have the ability to sell their shares in those companies over a second
market even though those companies are still private.

Interviewer: Well and how does that work I mean not to get too deep into it the buyer
and the seller register or what is the market place?

Jeremy: Yeah so well anybody can sell but the only people who can buy are what
are called accredited investors or qualified institutional buyers. In other
words wealthy sophisticated investors and all that happens if you’re
upholder of private company stock whether you’re an ex employee or an
early angel investor or a venture capitalist who invested in the firm you
have the ability to sign up for second market it takes 60 seconds and
essentially list your shares for sale.

Now we have both an electronic trading platform where buyers can see
what’s available but we also have market specialists these are experts in
private company stock sales who helped the buyers and sellers. They help
educate them, guide them and really facilitate transaction so that you can
sell your stock.

Interviewer: Okay so how’s the market these days for the—I mean is it cyclical that
depends strictly on the fundamentals of a company. Is it sort of are there
any trends you’re seeing?

Jeremy: There are a couple of things so first question is actually going very well
we launch the private company stock market just a little over a year ago
and in that year we’ve done approximately a quarter billion dollars in
private company stock transactions. Last year we did about 100 million in
total and just in the first quarter of this year there was around 130 million
dollars in private company stock transactions done so the growth has been
absolutely tremendous and early on the transactions were taking place in a
living number of companies. In fact for the first few months it was all
Facebook stock but now we’ve done transactions in several dozen start up
companies.

Now the theme is they’re all successful. This isn’t a junkyard for startup
companies that don’t work. These are really good start up companies but
they range from household named companies again like Facebook, Zynga,
Twitter, LinkedIn to companies that are very, very good. Their just not
well known and for those companies that are good but not household
names they just need to provide a little bit more information, a little bit
more transparency because people aren’t going to buy off of the brand
name like they do with some of those other more well known companies.

Interviewer: Okay so for Facebook what would they do, would they sort of say that
they’re going to put a certain amount in the private market place or and is
there evaluation said by the market place or how does it work?

Jeremy: Usually the way it works is you’ll have a specific seller so it won’t
necessarily be Facebook itself but you’ll have an ex employee of
Facebook who maybe has 500,000 shares and they’ll say well I no longer
work for Facebook I would like to get some liquidity so I can buy my
house or send my kids to college so I’m going to listen to my shares on
second market and then what happens is the market actually sets the price
so second market doesn’t do any evaluation or anything like that it’s the
bidders. The buyers who say I’m willing to pay $40 a share for facebook.

Well I’m willing to pay 42, 45, 47 in the high bidder is the one that wins
the sale for the shares, and then the buyer will put the cash in Escrow
second market. The seller will put the shares in Escrow and then when
both Escrow accounts are filled they exchange hands and that way no one
has left holding the bag by saying wait I gave away my cash now where is
my stock in Facebook. It’s very safe, secure process.

Interviewer: What is a share price of facebook now according to your market place if
you can— if there is something that you could like look on your
applications and see?

Jeremy: There is a note I absolutely love to tell you but one of the key probably the
most important part of our strategy is to make sure that we work with the
company and that we do this in accordance with how they want things
done so that the secondary market and shares for their companies happen
in a way that they are comfortable with and so as you can imagine one of
the first things companies tell us as we’re working with them is don’t
publicly mention the stock price of our private company stock so I would
love to give the answer unfortunately I can’t and you know in the spirit of
being friendly to our company customers.

Interviewer: How much does facebook stock you know sales, training is part of your
overall run?

Jeremy: Well of the quarter billion dollars in private company stock transactions
that had been done over second market about 40% of that is facebook. The
other or I should say the next 25 to 30% is Zynga, LinkedIn Twitter those
sorts of brand name companies and then the remaining I guess the math
will workout about 30% or so 30-35% are the a couple dozen other
companies again that are very successful just not the household names.

Interviewer: Thanks very much.

Jeremy: My pleasure.