Private Market Glossary

What is a private marketplace?

A private marketplace in finance is typically used to describe a platform where buyers and sellers of private securities are able to enter into a transaction for the purchase or sale of these private securities. Private marketplaces can facilitate other types of assets, such as private debt or REITs. A private marketplace may also be used to facilitate the primary issuance of a company’s shares.

Private marketplace in finance definition - Forge

A better understanding of private marketplaces

The difference between private and public marketplaces, as expressed by the name, is related to the type of assets that are traded on these platforms – private marketplace typically refers to a platform for trading private securities (stock, debt, etc.), and public markets referring to the trading of publicly registered securities.

Within a public marketplace, such as a public stock exchange (e.g., the New York Stock Exchange), publicly traded securities can generally be bought and sold by the general public. Anyone can view public information (e.g., pricing and volume). Within a private marketplace, however, only privately owned securities can be bought and sold, and trading activity may be restricted to only specific categories of participants.

The specific rules and processes can also differ depending on the assets being traded – e.g., only accredited investors can buy shares of private companies. However, a private marketplace could involve non-accredited participants too, such as private company employees looking to sell their shares, or with certain types of primary offerings, where SEC rules allow non-accredited investors to purchase private shares.

What role does a private marketplace play in the private market?

A private marketplace facilitates trading activity within the private market.

Not all private market investments have to go through a centralized marketplace.  Private marketplaces generally enable secondary transactions.

For example, investors might be looking to invest in more private companies, but a private company might not want to issue additional shares to sell. Instead, these investors could turn to a private marketplace to find sellers of existing shares.

What are some examples of private marketplaces?

Some examples of private marketplaces that enable secondary private market trading include:

  • Forge: Forge’s business includes a leading private marketplace that facilitates private stock trades among employees, companies, individual investors, and professional investors. Forge offers a variety of transactions, including direct transactions, investments through Forge Funds, structured company programs and tender offers, etc. Forge’s private marketplace trading volume has exceeded $12 billion (as of March 2022).
  • Other examples include EquityZen, which connects sellers and investors in the private secondary market primarily through EquityZen funds, and Nasdaq Private Market, which facilitates tenders and other issuer-driven transactions.

Frequently asked questions about private marketplace

Who can access a private marketplace?

Private marketplaces typically can only be accessed by buyers who are accredited investors and by sellers (non-accredited & accredited investors who already own shares), however each marketplace varies depending on the type of transaction and legal requirements for participation.

What is the difference between a private marketplace and an open stock exchange?

A private marketplace generally has restrictions around who can trade securities, for example buyers being limited to accredited investors. Private marketplaces also generally facilitate transactions in privately issued assets. In contrast, a public stock exchange typically enables trades of publicly registered securities by the general public.

About the Author

Jake Safane specializes in financial reporting and is a former thought leadership editor for The Economist with articles appearing in Business Insider and The Washington Post among other media outlets. Mr. Safane has received compensation from Forge Global, Inc. for authoring this article. Read more from Jake.

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Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. Past performance Is not indicative of future results.