Liquid Stock, a San Francisco and Los Angeles-based investment fund, provides financing for employees of private companies to exercise their stock options. It also serves other private company investors, who need liquidity prior to a full exit. Working with individuals who own substantial stakes in illiquid stocks, Liquid Stock helps them unlock the companies’ net worth.
As Liquid Stock continues to grow, the company could draw M&A interest from players in alternative investments or wealth management, said Greg Martin, founding partner.
Although Liquid Stock is not thinking about M&A at this stage, the company is a potential target or strategic partner for wealth management firms, noted Martin.
“Our goal is just to keep doing what we’re doing. At some point, there could be an opportunity for someone to take a larger piece of us, or maybe even buy us, or maybe we take it public,” Martin said.
Liquid Stock enables employees to keep their shares while accessing financing. Because employees retain ownership after exercising options, they are more motivated to participate in the company’s success, notes Martin. “The focus on financing instead of buy-and-sell differentiates Liquid Stock from peers who build private secondary marketplaces to transact shares.”
SharesPost, by contrast, which joined with rival Forge Global this May in a USD 160m deal, focuses on investing in or selling pre-IPO stocks, not financing.
In December 2019, Liquid Stock closed its first fund with USD 161m of committed capital. It has 10 to 15 companies in this fund.
Liquid Stock is looking to raise its second fund in Q2 next year, Martin said. It would be larger than the first fund, he said, but declined to specify a size.
Sixpoint Partners served as the placement agent for Liquid Stock’s first fund. Morrison & Foerster provided legal counsel.
The space has seen early M&A. In 2015, Nasdaq’s [NASDAQ:NADQ] subsidiary, NASDAQ Private Market, acquired SecondMarket for an undisclosed sum.