The US Securities and Exchange Commission (SEC) has approved a new stock exchange dedicated to startups in the technology field.
US regulators approved the new exchange last week, as reported by Reuters. The Long-Term Stock Exchange (LTSE) -- not to be confused with the London Stock Exchange's traditional Financial Times Stock Exchange (FTSE) -- is the creation of startup advisor and entrepreneur Eric Ries.
Ries previously raised $19 million to launch LTSE from venture capitalists but required approval from SEC before the exchange could be launched.
The LTSE, which will be based in Silicon Valley, will provide a platform for startups seeking a cash injection and those that wish to be able to trade, whilst also giving investors the opportunity to cash in on new, hot projects.
According to the publication, the national securities exchange aims to promote "governance and voting rights, while reducing short-term pressures on public companies."
The creator of LTSE does not want startups chained by quarter-to-quarter financial results, but would prefer that they focus on long-term gains and innovation.
In order to do so, LTSE-listed companies will need to comply with additional rules not required by our standard public markets, such as limiting executive bonuses that are based on short-term financial targets.
An additional rule will stipulate that startups need to maintain a high level of transparency to investors about reaching key goals and their overall business progress, and long-term investors must be rewarded through increased voting power the longer they choose to hold stock.
A number of technology companies and investors have signaled their intent to participate in the exchange, but their names have been withheld for now.
If the project proves to be a success, investors worldwide may be able to benefit by being able to sink funds into startups at an earlier stage. In turn, startups which often rely on angel investment or bail-out loans at present may be able to grow and expand more quickly with the opening of a new door to funding.
While this may also lead to high-risk and rogue startups becoming public and may increase overall investment risk as projects are not fully tested over a long period of time, LTSE could still shorten the gap between a successful startup's creation and the years which often pass before it is possible to invest in them.
After waiting over a decade to issue its Initial Public Offering (IPO), Uber bombed earlier this month. However, tech startup Zoom entered the market in April with a bang and an opening price of $65 per share, a far cry from its offering price of $36.
Previous and related coverage
- Aussie fintech Volt Bank starts by asking consumers what they want
- Policies released for Commonwealth to purchase tech from SMBs
- Queensland to move from 'startup to scale up' with new innovation strategy
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