Cantor Fitzgerald & Co., the broker-dealer that lost 658 employees in the terrorist attacks of September 11, 2001, has thrown its hat into the ring for the growing market for private exchanges. The firm is forming Cantor Private Markets Group to offer clients private alternative-investment opportunities, including company stock, real estate investment trusts and private equity and hedge funds.
“We’ve been a large institutional equity house for the last 15 years, so we look at this as the natural progression of the distribution channel that we have created on a global scale,” says Cantor CEO Shawn Matthews.
With the public markets shut to most IPOs and major technology trendsetters like Facebook still in various prepublic stages, private market exchanges have taken on added importance, not simply to provide liquidity for employees and companies, but also to allow additional investors — institutions and individuals alike — to participate. And because these investors tend to qualify as accredited under SEC guidelines, the private market exchanges can operate with minimal regulation.
Matthews says he sees this sector as an emergent market with no clear leader, where Cantor Fitzgerald’s global presence and existing base of investors and brokers should give it a competitive edge.
Cantor and others are trying to take advantage of the pent-up demand for prepublic stocks, says Trent Tillman, president and co-founder of Syndicate Trader, an investment advisory firm that specializes in emerging growth companies. Still, Tillman says he isn’t sure that the entry of new players will significantly expand the market.
The private market exchange could be a $7 billion market by the end of this year, according to Nyppex Holdings, an agent for secondary market block transactions. The marketplace of buyers will expand on Cantor’s new exchange, but the composition of the players will remain the same. “Asset managers continue to look for assets that are not directly correlated to the market,” says Matthews. “Investing in a private company 18 to 24 months before it goes public may well be that strategy.”
— Udayan Gupta