The growth in private markets in recent years has been dramatic, led by an increase in the number of unlisted companies that are valued at over $1 billion – the so-called unicorns. There were 963 unicorns worldwide in January 2022, with a value of $3.14 trillion, according to a list maintained by research firm CB Insights.
This creates a substantial revenue opportunity for firms that can tap into the market for secondary trading of shares in unlisted private companies.
‘‘What we typically see in the secondary market is that 1% to 2% of the total dollar value of the unicorns transacts in any given year,” says Andrew Tuthill, global head of equities private markets at JPMorgan.
That suggests that there is around $60 billion of annual deal flow to target and the eye watering fees charged on many secondary private share trades indicates that there is both a hefty profit on offer and an opportunity to win market share by charging a less extortionate levy on deals.
The boutique brokers and specialist trading platforms that have sprung up to offer secondary liquidity in private company shares – typically equity in US technology companies based in or near Silicon Valley – often charge 5% or 6% for each side of a trade, for a total of as much as 12% of the value of a deal.
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