JPMorgan Chase takes a stake in private equity trading platform with links to Palantir to bolster the bank’s efforts to connect buyers and sellers of pre-IPO company shares hot, CNBC learned
The bank’s investment in Zanbato, a fintech start-up based in Mountain View, Calif., is expected to be announced Monday, according to people with knowledge of the matter Zanbato was co-founded in 2010 by Joe Lonsdale, the entrepreneur who also co-founded data analytics company Palantir
The move is the first in a series of investments JPMorgan can make in trading platforms and exchanges that help the bank access data and prices in the growing and fragmented securities market private companies, according to Andrew Tuthill, global head of the private market actions
In the six months since JPMorgan began trading shares of private companies – a market that includes giant companies like SpaceX, Robinhood and Stripe new business has grown steeply Order flow and demand from trading counterparties have roughly doubled every month since CNBC first announced the deal in September, Tuthill said
Interest in pre-IPO firms has grown in recent years, luring JPMorgan into an area that had been the domain of smaller West Coast-based players This is in part because venture capitalists have invested hundreds of billions of dollars in private companies over the past decade, which has kept them private much longer than ever before Venture-backed companies were valued at over $ 2 trillion last year, according to PitchBook data
As hedge funds and yield-seeking family offices increasingly seek to own shares of private companies, executives and early investors in start-ups are also looking to sell positions which they have held for years, according to Zanbato CEO Nico Sand
“Companies stay private for so long that some of these early investors are 10 times more likely to have a position,” Sand said in an interview “Being able to manage oversized positions are things every manager has always done, but in the private markets you just never had the cash to use these basic portfolio management techniques”, a- he declared
The Zanbato platform, which is called ZX and was launched in 2016, has over 100 banks and brokers as members, giving it a reach in private equity trading that no company Even a company as large as JPMorgan, the largest US bank by assets, could not match
JPMorgan’s investment is the first to be made by a ZX platform member bank, and Zanbato will likely see more of its members make investments in the years to come, Sand said.
The startup saw its user base more than double last year, as transaction volumes more than tripled, said Sand, who co-founded Zanbato in Silicon Valley with Lonsdale and the Senior engineer Kevin Leung Most ZX members posted record levels of private equity trading last year, he said
Private companies with higher valuations, have been around for many years and have a diverse set of investors are probably the most traded names, Sand added.
Investment shows JPMorgan is willing to rely on external and technology vendors when it comes to serving its trading and wealth management clients rather than building all of its capabilities in-house Businesses don’t would not disclose the size of the stake or the amount paid by JPMorgan
While private equity trading is still primarily a manual process where closing a deal can take weeks, start-ups like Zanbato are looking to increase standardization in the emerging market. This will ultimately help the start of automation and speed up the time to complete transactions, just as technology has reduced the time to trade public stocks.
“One of the things we say in the private market is that time is the enemy of every deal,” Tuthill said “Zanbato creates execution efficiency which hopefully reduces the time required to complete a transaction “
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World News – CA – JPMorgan Invests in Private Equity Trading Platform with Palantir Link Amid Demand for Pre-IPO Shares