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SEC launches probe into tech startup share selling 'black market'

Investors fall over each other to get hold of a chunk of prime unicorn flesh

The US Securities and Exchange Commission (SEC) is launching a probe into the booming "black market" in hotly-tipped, privately-held tech stock occurring outside the US regulator's watchful gaze.

According to a report by The Wall Street Journal [paywall], the SEC is to launch an investigation after observing a recent boom in the trading of such shares.

Citing sources "familiar with the matter", the paper reported that the SEC is also examining a recent rise in firms selling employee-owned shares of private companies through derivative transactions.

The SEC has sent letters to a number of "middleman" firms that have been offering to trade stock with the employees of private tech companies, a person close to the situation told the WSJ.

According to the paper, the trading of such shares could be unlawful under the Dodd-Frank Act of 2010, which states most investors can only trade share swaps on a national securities exchange with a registration statement from the SEC.

Research from the WSJ found there are currently 78 privately held, venture-capital-backed companies worth $1bn (£650m), totalling $310bn (£199bn), up from 49 last year.

Startups worth more than $1bn have raised about $15.5bn in additional funds through the first half of this year, according to Dow Jones VentureSource.

Some of the most valuable private companies include Uber, which is now valued at $40bn (£26bn) and Airbnb – recently valued at $24bn (£15bn).

Separate research from tech financial advisors GP Bullhound revealed that Europe has also witnessed a boom in so-called £1bn-valued "unicorn" tech startups, up from 30 to 40 this year. Of those, the UK has 17 "tech" companies, including: ASOS, JustEat and Wonga. ®

 

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