Goldman Sachs (GS) has created their own private trading system called Goldman Sachs Tradable Unregistered Equity system or GSTRuE to compete with the pubic trading system. This will provide a great alternative for companies who want to raise capital but don’t want the regulatory and disclosure requirements that come with a public listing.
NEW YORK (Reuters) – Top IPO underwriter Goldman Sachs Group Inc. (NYSE:GS – News) this week launched a platform allowing an exclusive club of big investors to trade unregistered, privately placed securities, in the latest challenge to U.S. equity markets.
Last year, according to Nasdaq, $162 billion of capital was raised through unregistered private placements compared with $154 billion through IPOs, which are registered with the Securities and Exchange Commission.
This should be a great opportunity for Goldman Sachs.
However, under SEC rules, companies can sell securities without registering them as long as issues are limited to qualified institutional buyers, investors with at least $100 million of assets, and there are no more than 499 stockholders. So this means that the individual investor has no chance of direct participation.
This is most likely due to the public system being afraid of losing all their business to a better private solution… much like how the USPS won’t allow Fedex or UPS to deliver first class mail.
However, you may of course benefit from the system by owning Goldman Sachs shares and I’m sure there will be publically traded entities or ETFs that will trade in securities within the private system.
Full Disclosure: I own shares of Goldman Sachs and I am considering adding to my position.