- JPMorgan is launching a team for trading shares of private companies such as TikTok, Robinhood, and SpaceX, CNBC reported on Friday.
- Smaller firms have expanded into private-market trading, but JPMorgan's entry would be the first from a Wall Street giant.
- Private-market trading lacks the liquidity seen in the public market and often requires negotiations between buyers and sellers before trades are completed.
- Granting clients access to private companies' shares can allow them to bet on younger firms and benefit more from rapid growth.
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The team will connect prospective buyers and sellers of shares of private companies, Chris Berthe, global co-head of cash equities trading at JPMorgan, told CNBC. Targets range from Palantir, which is set to go public in mere weeks, to TikTok, which sits embroiled in international controversy.
The team will be led by Andrew Tuthill, a senior vice president at the private-market trading platform Forge Global. JPMorgan has fielded interest from hedge funds, company founders, and wealth management clients to form such a team, CNBC reported. Forge is one of a handful of private-market trading firms catering to the growing demand, but Berthe believes that no major Wall Street bank has dedicated a team to the sector yet, he told CNBC.
Such trading takes on a far more old-school form compared to most risk markets. While most Americans can trade shares of public firms fee-free from their phones, trading private shares requires negotiations and transfers of legal ownership. Private markets also lack the liquidity that fuels fast-paced public trading.
Interest in private-market trading has grown through the year as stocks trade near record highs and investor demand holds strong. Companies are generally staying private for longer than they used to, Berthe told CNBC, meaning investors taking part in an initial public offering today may have already missed out on the company's best years of growth.
The trend slammed IPO markets in 2019, as a spate of high-profile companies saw shares slump in their first days of trading. Where public market participants previously cared more about growth stories, those buying into more recent IPOs focus more on firms' ability to turn a profit.
Yet those wanting to take a risk and bet on a company's early years are largely left out in today's market. Opening the private market to clients offers access to firms at earlier stages in their lifespans and the potential value that follows, Berthe told CNBC.
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