When shareholders of companies that haven’t gone public yet want to sell their shares, what do they do? It’s a difficult position because without an IPO finding the right buyer for their valued shares is difficult. Who hold such shares? People who bet on startup companies like investors, venture capitalists and employees of the startups.

In case of the recent bad economy, if people want to trade their private shares in startups, then they have a choice now- SharesPost. It is an idea which will help private shareholders to sell shares in companies even before they go public.

SharesPost was launched publicly in June. The shares that may be trading in these exchanges may include shares of short-messaging site Twitter and business-networking site LinkedIn, Social networking site Facebook along with many others.

SharesPost is a private stock exchange that wants to help in solving the liquidity crisis. There are few private stock exchanges functioning currently.  

Employees at startup often work longer for a lesser payment. They get stock or options of the startup they hope will be their way to the rich. SharesPost and other such private stock exchanges could help startup employees get some cash if they can’t wait for a distant IPO.

These exchanges are open to a small pool of buyers. Nobody knows what amount of stock have been trade in these exchanges. According to New York-based SecondMarket, it has performed about 40 transactions in the past year with a value of about $150 million.

How they work

The working methods of these exchanges vary.

SharesPost - it uses an online bulletin board to introduce buyers and sellers

SecondMarket - It connects two and lets them set up their own mini-markets

XChange - It will have an online system to allow buyers and sellers connect and directly trade shares for cash

For whom?

All the exchanges are open just to institutional investors such as venture capital firms or pension funds managing at least $100 million and individual accredited investors. Accredited investors mean people with a net worth of at least $1 million, or salary of at least $200,000 for the last two years.

SharesPost reported of a $25,000 deal, which is the site’s minimum transaction size, for 2,500 shares of electric car startup Tesla Motors at $10 apiece.

You can sign up for free to see startups listed on SharesPost but only qualified investors can buy shares. SharesPost’s revenue comes from the charge it levies on buyers and sellers which is $34 a month.

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