Popular Equity
open market
open market
What happens after the seed stage?
During the seed stage, investment became seed capital for the venture and sets the starting market valuation. During the seed stage, investors can't trade ownership. They can only invest more, if they want to own more of the final venture.
In the open market stage, investors can now buy and sell fractional ownership of the venture. That buying and selling sets the market valuation for the venture.
Initial limits
At the beginning of the open market stage, trading is limited in several ways:
(1) The venture itself can't sell anything on the open market for the first 6 months.
(2) Individual investors can't put in sell orders for more than 20% of the average clearance.
(3) During the first year after the specific seed investment, investors can only sell upto 20% of their holding.
We assume most investors through Popular Equity are looking for long-term buy and hold investments. Existing investors get a one month notice for transitioning to the open market stage.
Novel Market Making
The process of getting buyers and sellers together and updating the price is called market making. Popular Equity makes markets in a slightly novel way for two reasons:
(1) to make room for additional seed capital at any point, and
(2) to avoid some of the obvious pitfalls with thinly-traded assets.
See: market making.
Failing and delisting in open market
Ventures can fail in open market and be delisted when there is no longer sufficient investor interest to maintain any value.Â
The venture can also be delisted, when the venture itself buys out the existing investors. To buy out existing investors, the venture either has to get 50% of the existing investors to agree to the buyout price, or the venture needs to own 90% of the entire venture, and pay the owners of the remaining 10% the current market price.
When a venture is delisted, its page is marked as delisted, and the records of the delisting and the trades stay public for 2 years.
Next: market making
Contact: openmarket@popularequity.com