Pioneering SME Shares Auction Platform Launched
Friday, August 05, 2011

Europe's first, interactive auction platform to trade privately-owned shares and investments has been launched in the UK by the highly-regarded Swiss-based technology firm LPO Ventures.

LPO Ventures expects trading volume to quickly increase from around EUR1-2bn over the next 12 months or so to around EUR10bn in 2015, based on analysis of the growth of similar markets in the US.

UK SMEs, family businesses and entrepreneurs can place their companies on the site, offer holdings in their firms to investors registered on the platform who can then trade these stakes online.

Private firms in other EU countries as well as from Asia and the Middle East can also list their shares, though it is not available for US private businesses.

In the UK there is a significant market opportunity with the Federation of Small Business alone having over 200,000 private firm members.

A perennial problem in the UK economy, which is currently particularly acute, has been the inability of growth companies to attract sufficient funding to finance their expansion.

Mid-market private equity houses and the recently launched Business Growth Fund have been trying to help address this but the problem is most severe in the GBP500,000-GBP1m range.

This is where most of the trading is expected on the new site, although theoretically big private companies such as Alliance Boots, Pret A Manger, Dyson and Phones 4U could also register on the market.

The market has been approved by the Swiss Federal financial supervisory body FINMA, so initially it will only be available to Swiss investors but the founders are seeking approval from other European regulatory bodies and expect to partner with an FSA-regulated body in the UK before the end of this year so that UK investors can participate.

There are no intermediaries, buyers and sellers trade via a traditional auction process using the latest in online technology. There is complete transparency in terms of the bid offer price and the site will use elements of social media to allow users to communicate real time via live chat.

The site is membership based and inexpensive with the annual charge for investors set at CHF299 (GBP227) with commissions on money raised set below 1%. The US market for trading in unlisted company shares kicked off in 2009 with USD2.4bn worth of stock traded that year. This year the value of US transactions of unlisted stock is expected to top USD6.9bn with still only a small fraction of the country's 190,000 private companies seeing their shares traded on private company-stock platforms.

Patrick Gruhn, founder and chief executive of LPO Ventures, commented:

"FirstPex will allow European investors and company-owners for the first time to use an open market trading platform to buy and sell stock in European privately-owned companies. The idea is simple: provide a solution for investors and business owners to trade non-liquid assets in a swift and cost-efficient manner."

"Britain along with Germany, France and Italy, is at the forefront of successfully creating businesses and ensuring that entrepreneurialism results in wealth generation. FirstPex will allow those business generators and entrepreneurs to trade holdings in their privately-owned companies far more easily with new investors with transparency and liquidity. The arrival of FirstPex also comes at an important time in particular for the billions of Euros locked-up in private-equity owned businesses which need a credible secondary market."

"Markets have existed in the US for three years to allow investors and company owners to trade in successful, often very-well known, privately-owned companies with Facebook probably the best-known company to trade on these markets."