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The NASDAQ Private Market

On Wednesday, March 6, 2013, NASDAQ surprised the small-cap and investment community when it announced it is acquiring Sharepost’s private company market place (PCMP) exchange and rebranding it.  On March 5, 2014, NASDAQ officially launched the NASDAQ Private Market (“NPM”) a new marketplace for private companies.  A PCMP is a trading platform, such as SharePost or SecondMarket, that provides a marketplace for illiquid restricted securities, such as private company securities, 144 stock, debt instruments, warrants, and the like or alternative assets.  It is on a PCMP that pre-IPO Facebook, Groupon and LinkedIn received their trading start.

The official NASDAQ press release announcing the launch of the NPM states that the NPM will “provide qualifying private companies the tools and resources to efficiently raise capital, control secondary transactions, and manage their equity-related functions.” The NPM will offer securities services through its wholly owned broker-dealer subsidiary, NPM Securities.  The release continues that “[M]ember companies on NASDAQ Private Market will also have the ability to connect with its global network of registered broker dealers representing qualified institutional buyers as well as family offices and other accredited investors.”  It sounds good, but the member criteria are fairly exclusive.

Private qualifying companies will be able to utilize the NPM to manage liquidity programs for employees and other shareholders.  The NPM will allow companies to identify a pool of potential buyers and set parameters on the percentages of holding that shareholders can sell.  All buyers must be accredited investors represented by a member broker-dealer, and member companies will be required to provide limited disclosures.

One of the intents of the NPM is to give private companies more time and flexibility in determining when or even whether to go public by enabling an exit strategy for employees and shareholders.  Another is to provide an opportunity for private companies to build long-term relationships with institutional buyers.  In addition, the structure of the NPM should ease the transition into a public company.

The NPS has created an online platform that can facilitate primary capital raises and control secondary transactions, disclosure management, capitalization table management and stock plan administration.

Member Company Requirements

Member companies must meet at least one of the following criteria:

  1. Company has received at least $30 million in funding in the last two years and has an enterprise value of at least $50 million based on the most recent funding round; or
  2. Company has total assets of at least $50 million and total annual revenues of at least $50 million; or
  3. Company has annual net income of at least $750,000 in the latest fiscal year or two of the last three fiscal years; or
  4. Company has at least $5 million of shareholders’ equity and has been operating for at least two years; or
  5. Company is sponsored and backed by a recognized financial investor(s) with a track record of successful venture investments.  A recognized financial investor has invested in at least three private equity investments over the prior two years or has at least $50 million under management and has a significant investment in the sponsored company.

Member companies must provide audited annual financial statements and unaudited quarterly financial statements to company-approved transaction participants.  In addition to financial statements, yearly disclosure must be made of management bios and a business description including a discussion of significant developments, operations and competition and risks, and capitalization information.

Member companies are required to adopt insider trading policies.  Although not required, member companies will be encouraged to adopt corporate governance standards, including (a) at least two independent directors; (b) an audit committee of at least two independent directors and at least two total members, all of which can read and understand financial statements and which committee should have sole authority to hire and fire auditors; (c) a code of conduct for all directors, officers and employees; (d) hold an annual meeting using online technology; and (e) appropriate review and oversight of related party transactions and conflicts of interest.


All investors must be accredited by NPM and must be represented by a member broker-dealer.


Shareholders will be able to use a private company portal to learn about their member companies’ “secondary transaction guidelines and liquidity programs.”  Even if a company is not a member, shareholders can seek member broker-dealer assistance with liquidity options.


Although I think that the NPM will become a widely used and very successful venture for NASDAQ, I do not think that it will be either widely used or widely available to development-stage, start-up or small- or mid-cap entities or their shareholders.

The Author

Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys

Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.

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