Finding An Exit Route For Unlisted Equity

2 mins. to read
Finding An Exit Route For Unlisted Equity

Whether you bought them on a whim, as part of a friends & family funding round or inherited them from a distant relative, the ownership of unlisted equity can be something of a double edged sword. As exciting as it may be to get in on the ground floor and have the potential to support what could turn out to be the next unicorn, all too often, many investors find themselves saddled with share certificates that are difficult to crystallize any value from – or even recognise a tax loss with – simply because they’re not listed on a traditional exchange.

That’s where InfinitX, the disruptive financial technology platform is helping. They have developed a platform that can be deployed by any institution or asset manager to deliver a venue for matching buyers and sellers in unlisted equity. Their first deployment has been with JP Jenkins, the UK’s most established share trading platform for private companies, but by using a series of standardised technology protocols, a wide range of institutions across the globe are now looking at establishing their own automated matching services using this proprietary software.

Whilst other solutions have existed for some time when it comes to matching buyers and sellers of unlisted equities, ultimately the manual processes which underpin these mean that all too often that the prices sellers manage to achieve are way below what they believe counts as fair value. What’s more, the inability to exchange, clear and settle such transactions over already established electronic market infrastructures precludes a large number of participants, but that’s where this new technology fills the gap. Approach your mainstream broker and they will be able to buy and sell shares listed on JP Jenkins on your behalf in exactly the same way as they would do on an established mainstream exchange. Equally money managers wanting exposure to the unlisted equity space now have a far easier route to a greatly increased range of investments.

In addition to the JP Jenkins deployment, InfinitX is also working with a number of other global providers of equity marketplaces to integrate its technology, which enables any approved market participant – like a broker or other financial institutions – to connect their existing systems seamlessly and directly into the underlying platform.

Remember that as a shareholder yourself, there’s nothing to stop you trying to find a willing counterparty to transact with, but fair valuations are going to be difficult to find in such a scenario. Instead, lobby the company’s directors to investigate either listing on the JP Jenkins platform or have them discuss the other options available with their corporate advisers – many of whom will already be aware of the InfinitX proposition. Critically this has to be issuer led with the board of directors mandating an admission onto an alternative trading platform, but the costs here are far from onerous and it offers the potential for better outcomes for shareholders who are ultimately the cohort directors are there to represent.

Historically such approaches have been expensive and because of underlying structures have only ever offered limited uplifts in liquidity. But the technology now exists to link significant pools of buyers and sellers via long-established market mechanisms and brokers, meaning the reasons for being saddled with zero value shareholdings are diminishing rapidly.

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