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Nasdaq Allies with SharesPost

by Zacks Equity Research

March 07, 2013 | Comments : 0 Recommended this article: (0)

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Nasdaq OMX Group Inc. ( NDAQ - Analyst Report ) announced a strategic alliance with SharesPost Inc. to build a trading platform for unlisted stocks. The joint venture (JV) will establish Nasdaq Private Market (NPM) in order to tap the private companies through SharesPost’s web-based platform.

Meanwhile, Nasdaq will own a majority stake in NPM, which is scheduled to be operational later in 2013, subject to regulatory approvals. Additionally, SharesPost will continue to run its broker-dealer operations separately.

With a listing of over 200 fast-growing companies, SharesPost operates on a web-based model and enjoys a wide-ranging network of privately-held companies who manage liquidity programs, raise primary capital online and offer shareholder liquidity options, among other financially-valued services.

California-based SharesPost started operations in 2009 and has witnessed rapid growth with the inclusion of technology start-ups such as LinkedIn Corp. ( LNKD - Analyst Report ) and Facebook Inc. ( FB - Analyst Report ) as members, before these firms went public.

Hence, the JV paves the way for a new business opportunity for Nasdaq as more companies desire to remain private given the regulatory and other challenges in public listings. Nasdaq aims to offer a complete package for managing funds to the private companies through NPM. This will be complemented by SharesPost’s high-grade technology and transparent market.

The NPM JV is further expected to boost Nasdaq’s competitive leverage and market position, which deteriorated over the past quarters due to the changing dynamics of the exchange industry. At a time when the traditional equity and derivative trading platforms have been experiencing weakness due to low trading activity and volumes, we believe Nasdaq requires to diversify into innovative business opportunities in order to retain sustainable growth in the future.

Others

While Nasdaq, LinkedIn and Facebook carry a Zacks Rank #3 (Hold), another outperfromer of the financial sector include Moody’s Corp. ( MCO - Analyst Report ) , which carries a Zacks Rank #1 (Strong Buy).

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