Our Working Models in the Secondary Market
Currently, buying or selling shares of a private company is an elaborate process that includes the finding of a counterparty to negotiate the price, following on all legal agreements, wading through the Target Company’s right of first refusal process and ensuring that all transfer and approval requirements are conducted properly. At the same time, it is important that you understand and comply with applicable law, in particular – securities law. PrivatEquity.biz helps investors charge through these steps by offering them 2 financial models that the investors can choose from:
Dedicated Limited Partnership:
The Dedicated Limited Partnership (LP) investment model gives investors a chance to invest in shares in pre-IPO private companies (Target Companies) and gain favorable long-term returns over and above what is regularly available to non-institutional investors that opt into the public equity markets via conventional investment channels. Until recently, such investment options were only available to professional and institutional investors. This innovative model and the low transaction costs increases access to these shares for a bigger proportion of private accredited investors who were locked out of such investment opportunities until now.
Under this model, investors invest in Special Purpose Vehicles (SPVs) in the form of partnerships and subscribe for limited partnership units, whilst these partnerships are the entities that actually buy and hold the shares in the Target Companies. The partnerships are managed by the General Partner which is a PrivatEquity.biz entity. The target investors for such dedicated partnerships are those that seek to invest between $20,000 and $1 million, while these investors get comparatively low entry thresholds and associated costs.
Such low entrance thresholds enable an investor to create his or own private “Pre-IPO Tech Fund” while investing in a portfolio of limited partnerships that hold shares of Target Companies that he chooses at his own will.
This model only makes available, shares of companies with participation requests that amount to $1 million or more in the aggregate underlying shares of such Target Company. The model, managed by PrivatEquity.biz’s team, complies with the strictest market standards and security laws.
PrivatEquity.biz collaborates with leading law firms to undertake the LP transactions while the tax and accounting obligations are handled by a top accounting firm with international affiliation.
The platform provides continuous supervision and timely reporting, and for its services, collects fees as follows:
- From the Selling Shareholder: a success fee equal to 2.5% of the amount received by the seller.
- From the investors: annual management fees and a one-time success fee from the profit following an IPO or exit.
No Fees are payable until a transaction is actually completed.
Following an exit, PrivatEquity.biz distributes the profits (minus the fees) among the members of the corresponding limited partnership. In IPO instances, participants have the option of receiving their pro rata portion of the shares held by the LP. All shares that remain, are sold on the market by the platform operator and the proceeds are distributed pro rata.
It should be noted; that the current legal structure selected by PrivatEquity.biz for the asset backed Dedicated Token is a limited partnership. This structure may change later on (e.g. moving to a limited company as the SPV), based on efficiency, legal or other considerations, while the basic model remains the same – the holder of the Dedicated Token has in his or her hand an asset-backed token which reflects his or her rights in connection with the Target Company.
A Direct Sale:
There are instances where investment through a dedicated LP may not meet the needs of investors. In such instances, PrivatEquity.biz facilitates a direct sale of the targeted shares in an amount of not less than $500,000. Where it executes direct sales, PrivatEquity.biz collects 2.5% from each the seller and the buyer. Please note that this model is not available in our Token Model.