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March 04, 2024 at 01:31 PM
What You Need to Know
- Startups weighing IPOs are staying private for longer, the firm notes.
- Private market trades let employees and others sell stakes to accredited investors.
- Investors seek the chance, albeit risky, to gain from investing in private growth companies.
Morgan Stanley’s wealth management arm is giving its clients a chance to buy and sell coveted shares of private companies before they are available to the wider public, as startups weighing initial public offerings increasingly remain private for longer.
The bank’s Private Markets Transaction Desk will assist Morgan Stanley Wealth Management clients seeking to invest in the highly fragmented and opaque market for private shares, according to a statement Monday. Shares in more than 1,000 so-called unicorns — private companies valued at over $1 billion — aren’t available to the general public, the statement showed.
Private market trades let employees and some institutional investors sell their stakes to accredited investors. Though the shares are inherently riskier due to their relative illiquidity, investors have been drawn to them as a way to capture the growth of companies like Reddit Inc., which is set to go public this month after nearly two decades as a private firm.
“There’s been increasing pressure over the past number of years to get into these companies while the value creation is occurring rather than having to wait until the IPO,” said Kevin Swan, Head of Private Markets Solutions at Morgan Stanley Wealth Management. “When investors have a need for liquidity we want to be there to have a solution for them.”
The offering won’t be aimed at competing with platforms that already enable investors to buy and sell shares of still private companies like Forge Global Holdings Inc. and Rainmaker Securities. Instead, Morgan Stanley will take an “open and agnostic approach,” working with external platforms as well as its different internal arms to complete trades based on each situation, Swan said in a phone interview.
