A little over a month ago, SecondMarket reached an implied valuation of $160 mn, thanks to a transaction it completed on, of all places, SecondMarket. Since then, it seems, the company has become more valuable. Much more valuable. According to the Wall Street Journal, SecondMarket now has an implied valuation of $200 mn, thanks to a recent $15 mn financing round. The investment, made by Social+Capital Partnership, is its largest.
1. Surge: SecondMarket’s implied valuation on its own platform jumped 25 per cent in only a month. It comes from a venture capital fund that participated in the SecondMarket auction on SecondMarket.
2. Financials: it helps to make money, and SecondMarket seems to do that well. The company says it has been profitable for the past five years, according to the Wall Street Journal, and generated $35 mn in revenue last year.
3. Competition: things might get a little tougher for SecondMarket going forward. In the past, it’s only real direct competition has come from SharesPost, with other forms of competition including direct private equity and venture capital investments. Recently, two more players have entered the fray: Liquidnet and Cantor Fitzgerald.
So, more companies are trying to win in a market that is now in the midst of …
4. Change: so far, the big names in pre-IPO trading have been Facebook, LinkedIn, Pandora, Zynga, Zillow,Groupon … you get it. Some of these companies went public this year, which effectively removes them from SecondMarket’s target market. Groupon and Zynga are poised to go public this month, with Facebook coming next year. The hot companies are ‘graduating’ to the major exchanges, which takes revenue opportunities away from SecondMarket. Sure, there are the likes of Foursquare and Twitter out there, and they won’t be going public for a while (if at all, to be frank). But, the companies in the process of leaving the IPO pipeline are still creating a vacuum that needs to be filled.
5. Future: Social+Capital Partnership‘s founder contributed to a program while he worked at Facebook that allowed employees to unload their shares on secondary markets. This is a compelling case for SecondMarket to bring to new potential listings. Meanwhile, the marketplace could be made more challenging by companies worried about accumulating too many shareholders and increased SEC scrutiny over transparency and trading volume. Yet, the liberalization of regulations, currently before Congress, could lead to greater opportunity.