Goldman leads charge toward exclusive stock markets Thu May 24, 3:26 PM ET
NEW YORK (Reuters) - Top IPO underwriter Goldman Sachs Group Inc. (NYSE:GS - news) this week launched a platform allowing an exclusive club of big investors to trade unregistered, privately placed securities, in the latest challenge to U.S. equity markets.
Private placements have become a big deal on Wall Street, another alternative for companies who want to raise capital but don't want the regulatory and disclosure requirements that come with a public listing.
Goldman on Monday helped underwrite the private sale of 15 percent of hedge fund manager Oaktree Capital Management for $880 million. As part of that sale, Oaktree told investors they would be able to buy and sell Oaktree shares through the new Goldman Sachs Tradable Unregistered Equity system, or GSTRuE.
The new system comes two weeks after Nasdaq Stock Market Inc. (Nasdaq:NDAQ - news) CEO Bob Greifeld said the exchange operator expected to launch a similar private placement "portal" as early as next month.
Meanwhile Morgan Stanley and other broker dealers are planning similar systems to tap the demand among investors and companies for a more transparent and liquid private placement market.
Last year, according to Nasdaq, $162 billion of capital was raised through unregistered private placements compared with $154 billion through IPOs, which are registered with the Securities and Exchange Commission.
Goldman declined to comment on Oaktree or offer detail about its plans for GSTRuE.
"Today we'll see how the system works and then as it evolves, as it develops, we'll see what happens," spokesman Ed Canaday said on Thursday. "We've put a significant first stake in the ground."
Under SEC rules, companies can sell securities without registering them as long as issues are limited to qualified institutional buyers, investors with at least $100 million of assets, and there are no more than 499 stockholders.
GSTRuE is based on Goldman's RediPlus electronic trading system. Participants in the unregistered stock platform can view indicated bids and offers and last sale prices. Investors wanting buy or sell securities then must contact their broker to make a trade.
Goldman's spokesman added that the bank will monitor the market for private securities issued on its system, to ensure the number of investors stays below the 500 threshold. Goldman will also serve as a market maker to GSTRuE clients, committing capital to facilitate trades. |
