Private Stock Markets, Goldman Sachs, and their GSTruE market

It looks like investment banks are trying to get in on the action of running stock markets, namely private stock markets. Goldman Sachs is the latest one to become an operate of a stock market by turning on their GsTRUE private stock market last month (May).

The GSTruE market made press in late May by taking a quality private equity fund and putting their shares on the GSTrue market. The company that listed was Oaktree Capital Management. Oaktree's shares now can be traded amongst wealthy Goldman clients (i.e. institutional investors) on the GSTruE. These wealthy clients are namely institutional investors.

Private stock markets like the GSTruE are close to markets that I have envisioned since starting GolfInvestors as an industry specific stock market back in 1999. Implementing these private stock markets is just one step to what needs to be done and can be done to help small and micro-businesses raise funding.

One of the differences with these private stock markets that investment banks are being set up and industry specific stock markets is that these new private stock markets cater to the wealthy and only the wealthy.

Second, these new markets will only be for for largely capitalized companies ...companies that are dealing in lots of money already.

Third, these new private stock markets are general industry markets and not industry specific markets. They are not targeted to one industry. Therefore they are still having to use the general rules of accounting for their reporting rather than being able to report financial results with industry specific accounting rules. So the financial reporting process can not be easily automated and easily read quickly by investors.

There needs to be more steps to making stock markets more accessible to small and mirco-businesses (i.e. like professional golfers) and more accessible for everyday investors (not just the large institutional investors) to invest in these types of companies.

This trend of private stock markets will be fun to watch to see if it continues making headway or if government legislation and regulation will hamper the initiative. Hopefully the trend will move closer to helping the small and micro-businesses in the necessary evil of raising funds to operate.

The common thought for the reason that these private stock markets are starting to take shape is because USA regulation is making it tougher for companies traded on current public stock markets. The biggest regulation that is being the cause of this is the Sarbanes-Oakley regulation that was implemented several years ago. The Sarbanes-Oakley regulation makes it very expensive for publicly traded companies to adhere to.

In my opinion, regulation is just one of the things that are making these private stock markets come to life. Other things that are making this happen is that more stock markets are starting to take shape and have liquidity and investor security that was only seen in the USA stock markets in the past. These other markets around the world are starting to list more and more companies namely because technology allows better communication and trading. These other markets are much more creative than the USA markets at this time.

The technology that is now available and is still continue to improve no longer requires a physical presence for a better market. More and more markets can be put into play with "consolidation" markets or brokers enabling investors to make trades on multiple markets in the location where the investor is located. This could be in their home town, on their own web site, on their bank's web site, or in other places that are convenient to the investor.

So even if regulation in the USA relaxes so that public stock markets can try to get back the leadership they once had in the financial world, this initiative of private stock markets will move forward. Technology allows it, and the market is pushing it. Government regulation can not stop that.