NYSE Euronext and ACE are planning to establish an independent technology backbone for new issuances of private securities, a process that is labor-intensive today and involves one-to-one marketing for regulatory reasons and lack of a centralized platform.. The partners cited the goal of bringing greater transparency and efficiencies to the private market, just as NYSE Euronext has brought to the public market. Demand for more innovative technologies in the private issuance market is another reason cited.
ACE, whose acronym stands for Accredited Cap Ex-change, is a three-year-old start up formed by former investment bankers. It built an online system used to match private issuers with qualified institutional buyers (QIBs), financially sophisticated institutional investors. But with the new platform, ACE claims it’s able to open the market to small to midsize QIBs and qualified purchasers, as well as family offices and retail advisers.
The move also reflects the competitive environment of for-profit exchanges seeking to boost their revenues in non-transactional areas, where listing fees from private companies would come into play. With over $1 trillion in annual offerings, the U.S. market for private placements is viewed as an untapped opportunity for NYSE Euronext that already has relationships with institutional investors for public offerings. Last year, NYSE Euronext’s main rival Nasdaq OMX hooked up with Sharespost to create an exchange for accredited investors to buy private company shares.
"The partnership with ACE is a strategic extension of our institutional capital formation expertise in the public market," commented Scott Cutler, EVP and Head of Global Listings at NYSE Euronext in today’s announcement. "Our goal is to bring greater efficiencies and transparency to the institutional private market, just as we have brought to the public market, continued Cutler. “ACE has taken a unique approach to improving the market for private placements and our goal is to make the private placement process more transparent, efficient and auditable for issuers, investors and placement agents."
In a video on NYSE Euronext’s web site, ACE CEO Peter Williams said ACE is providing a comprehensive transaction management and marketing tool to investment bank. It also provides a secure portal institutional investors, family offices and other accredited investors to seek out private placements. All listed offerings are managed by SEC registered broker-dealers to ensure regulatory and investor protection.
ACE delivers access to early-stage investment opportunities in emerging growth companies, private placements in middle market and large-cap private entities, PIPEs (Private Investment in Public Equity)— which occur when public companies issue private equity— and alternative investment funds, according to its site.
Its transactions are five times the size of the crowdfunded deals, according to Peter Williams, CEO of ACE in a video posted on NYSE Euronext’s site. In addition, ACE is focusing on the initial offerings in the private placement market, since secondary offerings don’t do anything to help the private companies growth, said Williams.
ACE is not disintermediating the investment banks; each deal has to be mediated by a registered placement agent, which is important to maintain regulatory oversight and investor protection, said Williams in the video.
Terms of the transaction between NYSE Euronext and ACE were not disclosed.