(Source: United Press International)
Exit strategies for U.S. venture capitalists all but dried up in the first quarter of 2009, giving a small shadow market a window of opportunity.
To make a profit, venture capitalists sell their companies to another company or the public in an initial public offering, The New York Times reported Thursday.
In the current economy, both options have been largely frozen in place. Only 56 companies were sold in the first quarter, the Times said. The number of public offerings in 2009: Zero, so far.
SecondMarket, founded in 2004, offers trades in private assets online, even though the market is limited by Securities and Exchange Commission restrictions.
Buyers are restricted to accredited investors. In addition, companies are limited to 500 or fewer shareholders or they must register themselves with the S.E.C.
"For this market to really develop Â
that rule needs to be changed, but right now, the government needs to do the exact opposite," said Roger Ehrenberg, a former hedge fund chief executive officer who runs IA Capital Partners.
The market may be thin, but SecondMarket reports it has 3,000 investors and has completed $1.5 billion in transactions, the Times said.
A service of YellowBrix, Inc.
