Venture Exchanges: Providing Liquidity for Small Cap Companies?
July 30, 2019
The creation of venture exchanges has been proposed as a way to facilitate capital formation for smaller, growth-stage companies. Venture exchanges involve:
- A public trading venue (open to individual retail investors and functioning as an exchange, with some transparency in pricing);
- A commitment to smaller, growth-stage companies;
- The ability for existing investors to sell their shares to new investors on the exchange; and
- The ability of the issuer to raise capital in connection a decision to list the shares for secondary trading.
A venture exchange may make it less expensive for companies to raise money, as investor funds would not be tied up indefinitely; investors could have some assurance that there would be a market for their shares. Employees and service providers who receive options or shares as compensation would also have a market for their shares. Ordinary retail investors would be able to participate in this market, thereby giving them access to an asset class with potentially higher growth trajectories than the stock of larger and more fully developed companies.
The realization of this venture exchange model under the U.S. law requires several layers of regulation. This program will discuss the regulatory scheme applicable to venture exchanges under U.S. securities laws and explore the benefits and potential pitfalls of this method of accessing capital.
- Bonnie J. Roe (moderator), Cohen & Gresser, New York, NY
- Gary Ross, Ross Law Group, PLLC, New York, NY
- Linda Lerner, Crowell & Moring, New York, NY
- Sara Hanks, CrowdCheck, Washington, DC
- Annemarie Tierney, Templum, Inc., New York, NY
Members of the Business Law Section may access the audio, program materials, and video from this program. Log in using your email address. CLE credit is only available to those attending the live programs.