Frequently Asked Questions
Private Shares Trading
- What is private shares trading?
- Private shares trading refers to the buying and selling of shares in privately held companies, as opposed to publicly traded companies. These shares are not available on traditional stock exchanges and change hands only through arm’s length private transactions. William Blair’s Private Shares Trading team facilitates transactions in privately held securities, with a focus on shares of venture-backed companies.
- Who are the market participants in private shares trading?
- William Blair’s Private Shares Trading team represents both buyers and sellers. The team handles pricing negotiation between parties and works with the company to facilitate approval, clearance, and ownership transfer. Sellers tend to be company shareholders, including employees, former employees, seed investors, and early-stage VC funds. Buyers are often family offices, VC funds, secondary funds, and crossover funds that are looking to add to an existing position or build new positions.
- Why should investors interested in private shares trading work with William Blair?
- William Blair Private Shares Trading offers a one-stop resource for both buyers and sellers of private shares, drawing on the depth and breadth of our comprehensive, award-winning research platform (both public and private companies). Our hand-picked team boasts deep industry relationships, having worked with hundreds of both buy side and sell side of secondaries participants at prior firms. We apply the highest standard of care to secondary trading, where discretion and transactional knowledge are paramount in this tightly held and illiquid market.
- What is driving the interest in private shares trading?
- Several factors are driving the growing interest in private shares trading. These include a decrease in primary fundraising and secondary activity as shareholders reassess pricing expectations following years of strong venture capital raises. In addition, rising costs of carrying private equity are putting liquidity pressure on some holders of venture-backed company stock, while internal valuations contract across the space. These factors, coupled with a marked decrease in primary market activity, have created a unique environment for investors looking to deploy the vast amounts of dry powder that some funds have been sitting on for over a year.
- What is the typical time frame for your PST transactions?
- Each private transaction is unique with respect to timeline, process, and requirements. Generally, a private transaction will take 45-60 days from the time from buyer/seller verbal agreement to closing. For many transactions, the right of first refusal period will last at least 30 days. In other instances, the right of first refusal may be waived sooner, or it may not be applicable at all as restrictions governing privately held stock differ from company to company (and often between equity plans in the same company). The Private Shares Trading team leverages years of experience and intimate knowledge of transaction restrictions to provide insight into timelines and requirements to closing on a case-by-case basis.
- Can William Blair offer private shares trading services in any venture-backed segment?
- Private shares trading is a generalist capability that has expertise across many sectors. However, certain sectors are more active than others based on availability of shares. Companies in certain sectors are more likely to compensate employees with incentive stock option plans, increasing availability of inventory, which in turn creates a more active secondary market. Some sectors tend to have more restrictions on their equity plans and capital tables, which can inhibit secondary trading.
- How does private shares trading work with your advisory (aka IB) division?
- William Blair clients have come to expect top-tier service from all divisions of the firm. While regulatory and compliance walls restrict private shares trading from interacting with certain parts of the bank, clients should expect the same level of professionalism across the firm. We provide a unique solution otherwise not addressed by many other traditional IB services.
- What industries or sectors do you typically trade in?
- The William Blair Private Shares Trading team works with companies across a wide range of industries, including SaaS, fintech, blockchain/crypto, and digital healthcare. Given the venture bias toward technology, many of the companies that we have transacted in are high-growth technology companies.
- Do transaction volumes tend to vary between subsectors or industries?
- Yes, transaction volumes can vary significantly between subsectors and industries, depending on factors such as the level of investor interest, the size of the company, and the stage of development.
- Unlike public markets, private shares have no “tape” to provide detail on historical prices and volume. How do you provide fair and transparent pricing?
- Our Private Shares Trading team works with a broad swath of broker dealers and alternative trading systems to seek best pricing in the market at the time of the transaction. Using third-party data providers, the team can provide clients with a broader view of the market and a specific issuer’s pricing dynamics.
- How do you ensure client confidentiality and why is that imperative when trading private shares?
- Confidentiality is imperative when trading private shares to protect the privacy of the company and its shareholders. William Blair has strict confidentiality policies in place and works closely with clients to ensure that sensitive information is kept secure.
- How do you provide a seamless clearing process for both buyers and sellers?
- Each transaction process is unique. Leveraging years of experience, William Blair’s Private Shares Trading team helps navigate this market drawing on historical precedents in each issuer. We work directly with the issuing company to close a transaction and will take into account all relevant seller and buyer relationships with the company to ensure process perfection and certainty of execution.
- William Blair’s Private Shares Team prioritizes discretion and white-glove execution over trade flow/volume. Can this impact price discovery?
- Prioritizing discretion and white-glove execution helps to ensure transparent pricing and protect the privacy of the issuer, its shareholders, and interested buyers.
- Who is typically allocated private company shares?
- Private company shares are typically allocated to early-stage investors, such as venture capital firms and angel investors, as well as employees and consultants of the issuing company.
- What may motivate a holder of pre-IPO shares to sell?
- Holders of private shares may be motivated to sell for several reasons, including personal liquidity reasons, fund concentration mandates, portfolio manager turnover, or portfolio diversification.
- How do investors gain access to late-stage private companies?
- William Blair Private Shares Trading works on behalf of both buyers and sellers. The team takes indications of interest from shareholders looking to liquidate their shares and compiles comprehensive inventory of stock on offer for William Blair’s buy-side clients.
- Is there a share amount or block minimum to participate as a seller?
- William Blair Private Shares Trading does not have a specific share amount or block minimum to participate as a seller. However, we work with clients on a case-by-case basis to determine the best approach for selling their private shares.
- How can the team at William Blair help sellers navigate the best time to sell?
- The Private Shares Trading team has a deep understanding of market trends and the factors that impact the pricing of private shares. We work closely with clients to develop a customized plan for selling their shares, considering their liquidity needs and market conditions. We also provide continuing guidance and support throughout the transaction process. All transaction decisions are directed by buyer or sellers as William Blair Private Shares Trading does not have discretion over any assets.
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