With research showing the rise of the private company economy, Kay McCarthy, Head of Jersey Office at The International Stock Exchange (TISE), explains how TISE Private Markets provides an innovative technology solution designed to transform private markets.

The International Stock Exchange (TISE) is an established operator of public markets, and we are best known as a leading European bond market. As a listing venue for international bond issuance, we assist global companies and asset management groups channel significant and growing amounts of private capital into the economy.

In addition to being a major bond market, TISE also has equity listings ranging from investment funds to Real Estate Investment Trusts (REITs) and trading companies. The success of our public market enables us to diversify our offerings and explore opportunities that complement our core offering and we have been doing this in the private markets.

The private company economy

In today’s evolving financial landscape, it is becoming increasingly clear that public markets have served the largest companies very well, but small and mid-sized businesses often find that these markets do not adequately meet their specific needs.

In fact, the UK economy is now predominantly driven by private companies. Of the UK’s 33 million workforce, a staggering 27.5 million are employed by privately held businesses. Over the past decade, the number of private companies with over 100 employees has increased by 3,096, bringing the total to 19,150 – 15 times the number of quoted companies. These private firms are responsible for the bulk of goods and services we rely on, generating jobs, tax revenues, and driving exports.

Despite their importance, private companies face considerable challenges when it comes to share trading. The current mechanisms for buying and selling shares in private businesses can for many be slow and inefficient. The process has not significantly evolved since the 1920s. It is characterised by a system that can often take months to complete a transaction, limits liquidity and creates barriers for companies looking to grow or provide exit opportunities for shareholders.

Seeking an efficient private market solution

 As private companies continue to grow and build value, they need a better way to facilitate liquidity events – without the regulatory burden or costs associated with public markets. The UK Government has recognised the limitations of both public and private markets and has consulted on the introduction of the Private Intermittent Securities and Capital Exchange System (PISCES). This system would allow shares in private businesses to be traded in periodic auctions. While the concept is intriguing, it has received a lukewarm reception from industry who have concerns about cost, demand, and the practicalities of implementation.

"private companies face considerable challenges when it comes to share trading."

There are several existing platforms which facilitate secondary market transactions for private companies and while the popularity of these platforms has grown, they are still heavily reliant on public market infrastructure, involving brokers who charge fees for every transaction. This adds unnecessary cost and complexity to the process, further underscoring the need for a truly private and efficient system.

TISE Private Markets: A tailored solution

Recognising the gap in the market for an efficient, fully disintermediated trading solution, TISE spent two years engaging with private businesses to develop a platform that addresses their specific needs. In response to this feedback, we launched TISE Private Markets – the first platform of its kind for private companies in the UK and Channel Islands. This platform offers a new approach to share trading that is more efficient, cost-effective, and tailored to the challenges of private companies.

"...we launched TISE Private Markets – the first platform of its kind for private companies in the UK and Channel Islands."

TISE Private Markets provides a comprehensive and fully integrated set of electronic solutions, including trading, settlement, and registry management. Uniquely, it allows companies full control over their dedicated market. From onboarding shareholders to scheduling auction events and managing share registers, private companies can take charge of their trading activities without relying on intermediaries.

The future of private markets

Blue Diamond Limited is one of the largest garden centre groups in the UK and the Channel Islands. With over 4,000 employees and annual revenues approaching £350 million, it had the scale to join a public market but chose instead to be the first company to join TISE Private Markets.

Blue Diamond was able to streamline its share trading process, maintain control over its shareholder base, and avoid the higher costs associated with a public listing. The feedback from Blue Diamond’s management and shareholders has been overwhelmingly positive, and we are proud to have helped them achieve their goals. Following this success, we have developed a pipeline of other prospective clients.

"In delivering this service, we have continued to innovate so that our offering is highly attractive to a variety of businesses."

In delivering this service, we have continued to innovate so that our offering is highly attractive to a variety of businesses. This ranges from companies which are privately owned, from those held by private equity groups or Family Offices to those currently quoted on public markets but seeking to return to a private ownership model. Other prospective clients include companies operating employee shares schemes, groups delivering tokenised asset solutions and fund management groups seeking to provide liquidity events to investors in their products.

As the private markets landscape grows and evolves, technology and innovation will play a key role in its development. TISE is proud to be at the forefront of this transformation.

This article was originally published in the Jersey Evening Post, Finance Review, September 2024