Equidate to Make Data About Private Companies Free and Open to the Public

Katie Benner reported in the business secant of yesterday’s New York Times that, “Private companies like Uber and Snapchat are not legally required to share financial information such as their valuation or the number of shares held by investors. For investors, that lack of transparency is something of a hazard.

“Now Equidate, a market for trading shares of private companies, plans to lift the veil on some of that information. The company, based in San Francisco, said on Monday that it would make a host of data about private companies free and open to the public, drawing from corporate filings that include the prices that investors have paid to invest in the companies. Equidate also plans to release tools that shareholders can use to calculate the value of their private-company stock holdings.”

Ms. Benner noted that, “The lack of transparency around private companies, along with a scarcity of shares, has kept the market for start-up stocks fairly small. About $750 million of private shares are actively listed for sale on the Equidate marketplace. By comparison, the total public stock market in the United States includes trillions of dollars of shares.

To buoy the market for private-company shares, a handful of start-ups have worked to increase transparency and liquidity. Apart from Equidate, the start-up eShares lets privately held companies electronically issue and manage their shares so that investors know who owns what piece of the company at any given time.”

The Times article added that, “While information about private companies does exist, it is typically fragmented or hard to find in corporate filings without paying thousands of dollars a year to data-service companies. With Equidate’s new data service and tools, investors can easily see what the current share price of a private company like Lyft might be on the Equidate marketplace and compare it with the price that venture investors and other institutions paid in the past.”

Ms. Benner also pointed out that, “Regulators are also taking a closer look at the marketplaces for trading private-company stock, which are generally known as secondary markets. Mary Jo White, chairwoman of the Securities and Exchange Commission, said in a March speech that in the past, private-company secondary markets were rife with issues including conflicts of interest and fraud.”

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