ZURICH/BUCHAREST (Reuters) - A Swiss trading platform could help put a price on private companies like furniture retailer Ikea or automotive supplier Bosch by matching potential buyers and sellers of their shares via auctions.
Valuing private companies can be difficult. Transactions are usually organized through intermediaries, with no formal market mechanism to establish prices, unlike publicly traded companies, where bids and offers are visible to buyers and sellers.
The service, called FirstPEX, is currently only available to Swiss qualified investors -- private investors with financial assets of at least 2 million Swiss francs or institutions like pension funds -- but plans to open to other users in Europe.
“If you look at big private companies like Ikea IKEA.UL or Bosch (BOSH.NS), there are people who want to invest and some owners who want to exit, but they cannot do so without going through an intermediary,” founder Patrick Gruhn told Reuters.
“FirstPex is the first secondary market in Europe where buyers and sellers trade stakes in private companies based anywhere outside the United States, and it will bring better price transparency and liquidity to a notoriously illiquid markets,” Gruhn said.
FirstPEX could boost liquidity in the market for private company ownership, which could in turn increase valuations, said Gruhn.
Potential sellers and buyers transact through a traditional auction process, eliminating intermediaries just as Google’s (GOOG.O) initial public offering cut out the role of investment banking book builders.
“But the process is not terminated when the best offer has been made, the seller has to accept the offer,” Gruhn said.
The transactions between buyers and sellers will be formalized outside the platform, and the execution of transactions will be the responsibility of users due to rules on the transfer of private company ownership, he said.
Gruhn has big ambitions for the service, which he is in the process of expanding to British, German, French and Italian clients. He is also eyeing Asia and the Middle East. The platform is not open to U.S. investors.
He said the platform could offer businesses an alternative way of financing themselves in the future.
“Once we have the right volume of participants, it could even allow businesses to fund themselves without going through the issue of listing,” he said.
Editing by Erica Billingham