A vehicle containing shares in a £1.3bn venture capital firm that backs tech spin-outs from Oxford University will be the first organisation to use the the new Pisces private stock market, the London Stock Exchange has said.
The UK’s flagship capital markets operator confirmed that shares in Oxford Science Enterprises, an early-stage VC fund best known for investing in quantum computing trailblazer Oxford Ionics, will be the first to trade on its Private Securities Market (PSM) with an auction taking place “in the coming weeks”.
In a major milestone for London’s bourse, the transaction marks the first use of the fledgling Pisces (Private Intermittent Securities and Capital Exchange System) framework, a newly approved market for private companies periodically to trade shares in a manner similar to a public stock exchange.
The shares will be held in a vehicle known as a TPEIC, an investment structure built to facilitate the trading of private shares, meaning Oxford Science Enterprises will not itself list on the London Stock Exchange’s PSM.
The TPEIC will be owned by Tradable Private Equity (TPE), a little-known capital markets start-up set up to help improve liquidity in private assets.
“Private markets have expanded significantly over the past two decades, but liquidity mechanisms have not evolved at the same pace,” said TPE founder Fred Bouverat. He added that the vehicle will offer professional investors exposure “to innovation from one of the world’s leading research universities… while removing the complexity” associated with a venture capital fund listing on the London Stock Exchange’s Pisces product itself.
Many investors had expected the new private stock exchange to host fast growing companies themselves, with fintech darling Iwoca understood to be interested in trading its shares on the exchange.
Speculation over the companies likely to use the exchange had largely centred around some of Britain’s household-name scale-ups after two-dozen firms – including Revolut, Octopus and Oaknorth – joined an event for interested parties last year. Octopus boss Greg Jackson has since said his utilities giant had “no plans” to use the exchange.
London Stock Exchange boss ‘delighted’ with first transaction
However, London Stock Exchange officials now expect its PSM to be used by a mix of companies and the TPEIC-like vehicles similar to the one containing Oxford Science Enterprises’ shares, City AM understands. The development will come as a blow to the proponents of the market who had hoped the innovation would provide a shot in the arm to the UK’s barren IPO pipeline.
Successive Chancellors and Treasury ministers have held the exchange up as a key tool in their battle to coax more firms to pursue a London listing. But a proliferation of TPEIC structures, like the one being used to host Oxford Science Enterprises’ shares, is unlikely to accelerate or improve the likelihood of the firms whose shares they contain making a debut in London, officials conceded.
Julia Hoggett, chief executive of the London Stock Exchange, said: “We are delighted that the first transaction will take place on our Private Securities Market in the coming weeks.
“This is a clear example of how companies, and structures such as TPEIC, can use our new market and the PISCES framework in innovative ways to access the solutions that best suit their needs.”
The auction will grant thousands of investors access to shares in Oxford Science Enterprises, one of the UK’s largest and most vibrant venture capital funds.
The fund specialises in early stage investments in frontier technologies like artificial intelligence, life sciences and quantum computing, and since it was established in 2015 has backed dozens of firms that have emerged from its neighbouring university.
It recently exited a major stake in quantum computing unicorn Oxford Ionics, after the tech trailblazer was sold to US rival Ionq for over £1bn.
It is not known how many of the fund’s shares will be released by TPE in the auction, which is expected to take place before the conclude of March.
The Rise of Private Market Liquidity
The move signals a broader trend towards increased liquidity in private markets. Historically, investing in private companies meant a long-term commitment with limited opportunities to exit before an IPO or acquisition. Platforms like the LSE’s PSM, and the Pisces framework, aim to change that.
This shift is driven by several factors, including the increasing number of companies staying private for longer, the growing demand from investors for access to private market returns, and technological advancements that facilitate trading and settlement of private shares.
What Does This Indicate for Investors?
Greater liquidity in private markets offers several potential benefits for investors. It allows for portfolio rebalancing, provides opportunities to realise gains, and can potentially reduce the illiquidity premium typically associated with private investments.
However, it also introduces new complexities. Valuing private shares can be challenging, and the lack of transparency in private markets can make it difficult to assess risk. Investors need to carefully consider these factors before participating in private market trading.
The Future of Private Equity Exchanges
The London Stock Exchange’s foray into private market trading is likely to be followed by other exchanges and platforms. One can expect to see further innovation in this space, including the development of new trading mechanisms, improved data analytics, and increased regulatory oversight.
The success of the Pisces framework will depend on attracting a critical mass of companies and investors. If it can demonstrate its ability to provide a liquid and transparent market for private shares, it could become a significant force in the future of capital markets.
Frequently Asked Questions
What is the Pisces framework?
Pisces is a new market framework developed
