Wednesday, December 29, 2010
Report: SEC Probes Private Shares Trading
The Securities and Exchange Commission is in the midst of a probe of companies which allow the buying and selling of private company shares, according to a report in the Wall Street Journal. According to the WSJ, the SEC is looking at trading of private shares of companies--done through such sites as Santa Monica-based SharesPost and New York's SecondMarket--specifically looking at funds which are buying up shares of popular companies like Facebook, Twitter, Zynga, and LinkedIn. Apparently, the SEC is concerned over the use of those funds to keep the number of investors in firms under the 500-investor mark, which triggers disclosure requirements with the SEC.
Sites like SharesPost allow accredited investors to purchase private company shares from insiders, allowing those employees and executives to gain liquidity for their shares. The sites have cropped up in recent years as the ability for companies to reach the public markets via an IPO had declined, and employees were looking for a way to gain some liquidity for their shares.