Staying private: the booming equity market in hottest start-ups

Staying private: the booming equity market in hottest start-ups

In 2014, an Austrian entrepreneur offered investors a rare chance to buy shares in Jumio, his fast growing and profitable payments company. The transaction was not a typical venture capital transaction. Instead of buying new shares, investors could buy back previous shareholders, in so-called private side transactions.

Daniel Mattes, who calls himself a “visionary” on his Instagram page and has been a judge on the Austrian version of Shark Tank, the American entrepreneurial reality series, told at least one potential buyer he didn’t not intend to reduce its own participation. in the company, according to a complaint filed by the U.S. Securities and Exchange Commission in 2019. Mattes also signed documents which the complaint said claimed Jumio made a small profit and income from more of $ 100 million in 2013 – a significant sum for a three-year business.

Two years later, Jumio filed for bankruptcy and the company’s shares became worthless. In fact, according to the SEC, Jumio had only made a tenth of the income he claimed, and Mattes had bypassed his board of directors to sell about $ 14 million of his own stock.

Jumio’s case highlighted the risks of an opaque but rapidly growing corner of finance: the global equity market in private start-ups such as ByteDance, owner of TikTok, SpaceX of Elon Musk and the company. of Stripe payment. In 2019, the market was estimated to host nearly $ 40 billion in lightly regulated transactions, according to one participant, more than…

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