Friday, May 25, 2007

Goldman and the NASDAQ plan "private" markets

First the news: Goldman Sachs the latest to offer unregistered trades - May. 24, 2007:

"Top IPO underwriter Goldman Sachs Group Inc. 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 that want to raise capital but don't want the regulatory and disclosure requirements that come with a public listing."

And later:
"Under SEC rules, companies can sell securities without registering them as long as issues are limited to qualified institutional buyers and investors with at least $100 million of assets and there are no more than 499 stockholders."
As an addition, the NASDAQ has plans to do the same. (is the market big enough for two "markets"?)

Wow, talk about a story that could be used for a great class discussion!

Five quick teaching ideas:
1. What risks are there in trading unregulated securities?
2. Who will be active in this market?
3. What are the advantages? Disadvantages? from both the investor and the firm perspective
4. What role have increased costs (SOX etc) played in this?
5. If this catches on and liquidity is present, what predictions do you have about the number of IPOs?

Alphaville does a great job covering this!

Thanks to Greg (arguably the worlds best administrative assistant!) for suggesting this story!

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