2018 has seen an increase in private companies accessing the private markets through private company liquidity programs.  Nasdaq Private Markets recently released a report showing an increase of 74% in total number of private liquidity programs between 1H2017 and 1H2018.  The 33 programs completed in the first half of 2018 have a total program volume of $10 billion.  This is a 37% increase in total program volume over the first half of 2017.  Twenty of these private liquidity programs were structured as third-party tender offers, while the remaining 13 were share buybacks.

Breaking down the programs by number of eligible shareholders shows that 33% of programs are completed by companies with less than 100 eligible shareholders, 33% by companies with 100-250 eligible shareholders, 24% by companies with 250-500 eligible shareholders, and 10% by companies with over 500 eligible shareholders.  Additionally, 50% of companies completing private liquidity programs are valued at over $1 billion.  Nasdaq’s report leads us to conclude that a broader range of companies have turned to private liquidity programs than in recent years.

Nasdaq’s report is available here.


Fintech companies continue the global trend of companies choosing to remain private longer and raising large amounts of capital through private channels.  A recent CB Insights report covered the financing trends of fintech companies for the first half of 2018.  As of the date of the report, there were 29 fintech unicorns valued at $84.4 billion globally.  The second quarter of 2018 valued five fintech companies at unicorn status (over $1 billion).  Three of these new unicorns are based in the United States.

U.S. fintech companies raised $3.2 billion in new capital over 146 deals in the second quarter of 2018, bringing the total number of deals for the first half of the year to 303, raising approximately $5.3 billion.  Compared to Q2 2017, last quarter’s total capital raised increased over 52%.  Not surprisingly, later-stage capital raises made up over 83% of deals in the second quarter, raising approximately $2.7 billion over 74 deals.

There was only one IPO exit by a fintech unicorn in the U.S. in the second quarter of 2018, which raised $874 million.  Globally, M&A exits accounted for approximately 85% of fintech company exits, with 39 M&A transactions, while there were only seven fintech IPOs completed in the first half of 2018.

For more information, read CB Insights’ Global Fintech Report Q2 2018.

Large, late stage private capital raises for privately held companies continue to be the preferred method of financing growth for many new companies, particularly those in the tech sector.  A recent analysis conducted by data provider CB Insights examined what the industry calls “mega-deals” or “private-IPOs,” which are private placements raising over $100 million in proceeds.  These deals, which have a median deal size of $160 million, have largely contributed to the emergence of unicorns, or private companies valued at over $1 billion.  This trend in private capital raising has become more prevalent since the enactment of the JOBS Act in 2012, which has made it easier for companies to remain private longer.

A closer look at the data compiled by CB Insights shows that, over the last five years in the United States, over 90% of capital raises for private companies were later stage or mezzanine investments.  These deals have raised over $300 billion in capital for companies, with $151.7 billion of these deals fitting into the rubric of “private-IPOs.”  Based on the CB Insights analysis, it would appear that transaction volumes for 2018 are on pass to surpass those in 2017.  While legislators contemplate the capital formation-focused package of legislation that has been dubbed “JOBS Act 3.0,” and consider measures to make going public more compelling, it’s clear that there is no shortage of private capital to finance promising companies.

Late on Tuesday night, the House passed the recently unveiled JOBS & Investor Confidence Act on a vote of 406-4. The almost unanimous decision advances the bill, commonly referred to as JOBS Act 3.0, which is comprised of 32 individual capital formation-related pieces of legislation.

Among other reforms, the bill proposes changes to existing rules that would affect regulations on angel investors; the definition of an “accredited investor”; the expansion of IPO on-ramp expeditions for EGCs; and the easing certain securities regulations for IPOs.

House Majority Leader Kevin McCarthy, co-author of the original JOBS Act, noted that the Act is “…evidence of this House’s commitment to expanding opportunity for American workers and investors.”

We will be following this post with a more comprehensive legal update discussing the bill.

Today, a bipartisan, capital formation-focused, package of legislation was unveiled by House Financial Services Committee Chairman Jeb Hensarling and Ranking Member Maxine Waters.  The “JOBS and Investor Confidence Act of 2018” is comprised of 32 individual bills, including those we have previously blogged about, that have already passed in the Committee or in the House this term.

Chairman Hensarling noted that the efforts of the Committee and the package “…will play an important role in sustaining long-term economic growth and global competitiveness.”

A chart of the bills that comprise the legislative package can be found here.

The House Financial Services Committee met last week and approved eight capital formation-related bills. The bills require the Securities and Exchange Commission to take action to change certain of its definitions in its rules and provide guidance on a number of securities-related issues.  These include amending the definition of a qualifying investment; requiring a study on IPO underwriting fees with the Financial Industry Regulatory Authority; and requiring a study on expanding investments in small-cap companies. Committee Chairman Jeb Hensarling noted that these bills “…will help our small businesses gain capital, help entrepreneurial ventures, and help companies in America go public and stay public.”

Below we provide a summary of the principal bills:

H.R. 6177, the “Developing and Empowering our Aspiring Leaders Act,” requires the SEC to revise the definition of a qualifying investment to include equity securities acquired in a secondary transaction.

H.R. 6319, the “Expanding Investment in Small Businesses Act,” requires the SEC to study whether the current diversified fund limit threshold for mutual funds of 10% constrains their ability to take meaningful positions in small-cap companies.

H.R. 6322, the “Enhancing Multi-Class Share Disclosures Act,” requires issuers with a multi-class stock structure to make certain disclosures in any proxy or consent solicitation materials.

H.R. 6324, the “Middle Market IPO Underwriting Cost Act,” requires the SEC, in consultation with FINRA, to study the direct and indirect costs associated with small and medium-sized companies to undertake initial public offerings.

H.R. 6320, the “Promoting Transparent Standards for Corporate Insiders Act,” requires the SEC to consider certain amendments to Rule 10b5-1 and directs the SEC to consider how any amendments to Rule 10b5-1 would clarify and enhance existing prohibitions against insider trading while also considering the impact of any such amendments on attracting candidates for insider positions, capital formation, and a company’s willingness to operate as a public company.

H.R. 6323, the “National Senior Investor Initiative Act of 2018,” creates an interdivisional task force at the SEC, to examine and identify challenges facing senior investors and requires the Government Accountability Office to study the economic costs of the exploitation of senior citizens.

The U.S. IPO market has kept a steady pace through the second half of 2018, according to EY’s quarterly IPO trends report.

54 IPOs were completed in the second quarter of 2018, raising $12.9 billion, which amounts to a total of 101 IPOs, raising $29.9 billion for the first half of the year.  This is a 20% year-over-year increase in proceeds, and a 30% year-over-year increase in volume compared to the second half of 2017.

The median deal size for IPOs in the second quarter was $124.2 million, with only one IPO raising over $1 billion in proceeds.

The technology sector saw both the highest number of IPOs completed and the most proceeds raised in the second quarter of 2018, with 17 transactions, raising $5.1 billion.  Many of these tech sector-IPOs were done by unicorn companies.  Below we provide a graph of the top five sectors by number of IPOs based on EY’s data.

In addition, EY reports that 39 of the newly public companies chose to list on the Nasdaq, while 15 listed on the NYSE during the second quarter of 2018.

For more, see EY’s Global IPO trends: Q2 2018 report.

The Securities and Exchange Commission has announced that its next Investor Advisory Committee meeting will take place on June 14, 2018 at 8:30 a.m. ET. The meeting will be hosted in Atlanta, which will follow the SEC’s Investing in America Town Hall on June 13.  This will be the first time the Committee will host a meeting outside Washington, D.C.

The June 14 Committee meeting will include:

  • Discussion of the Commission’s Proposed Regulation Best Interest and Proposed Restriction on the Use of Certain Names or Titles;
  • Discussion Regarding the Commission’s Proposed Form CRS Relationship Summary, including Effective Disclosure and Design; and
  • Discussion Regarding Disclosure Enhancements for Municipal and Corporate Bonds

This meeting will also be webcast on the SEC’s website.

On June 13, 2018, the Securities and Exchange Commission will host an investor town hall at Georgia State University’s College of Law.

The town hall will cover a range of topics from finding information about investments, ICOs and digital assets, to cybersecurity.  The Commissioners and SEC staff will then lead breakout sessions, including: “Bitcoin & ICOs;” “Investing in, and Raising Money by, Small Companies;” a session on mutual funds and ETFs; and others.

Visit the SEC’s Investing in America website for additional details and to RSVP.

The first quarter of 2018 saw increased year-over-year IPO activity, according to a recent report published by EY.  A total of 36 IPOs were completed in 1Q2018, raising $12.8 billion in proceeds. This was a 44% increase in number of deals and a 17% increase in proceeds compared to 1Q2017.  U.S. IPOs made up 12.5% of the 287 IPOs that were completed globally, which raised $42.8 billion in proceeds.  The median IPO size for this first quarter was $140 million, with the three IPOs over $1 billion.

The healthcare sector accounted for 25% of IPOs by the numbers and the technology sector accounted for 25% of all proceeds raised.  The top five most active sectors by number of IPOs included healthcare with nine IPOs, raising $0.7 billion; energy with six IPOs raising $1.8 billion; technology with four IPOs, raising $3.2 billion; consumer products with four IPOs, raising $1.7 billion; and real estate with three IPOs, raising $2.7 billion.

Of the 36 IPOs in the first quarter of 2018, 20 elected to be listed on the Nasdaq and 16 on the NYSE.  2018 has also seen 28 new public IPO registration filings, including filings by a number of high-profile technology unicorns according to EY.

To read more, see EY’s Global IPO trends: Q1 2018 report.