Morgan Stanley Buys EquityZen in Private Markets Push

Bloomberg

Watch Morgan Stanley Buys EquityZen in Private Markets Push - Bloomberg on Dailymotion

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00:00Morgan Stanley's head of wealth management told Bloomberg News in an interview that

00:03Equity Zen and Morgan Stanley had been in talks for about two years.

00:08What finally got this deal across the finish line?

00:11Hey, thanks for having me, Katie. Yeah, that's absolutely right.

00:14So Morgan Stanley and Equity Zen have been, first of all, partners for many years.

00:19But then the last two years in particular, I think two things happened.

00:23One, Equity Zen, 13-year-old company, we believed in the private markets from the very beginning.

00:27We began to see a real tailwind begin to pick up in the space.

00:33And Morgan Stanley, really, you know, one of the pioneers among the large incumbent banks

00:38that has really acted to participate in private markets with their acquisition of Solium several years ago,

00:44with the equity plant services business that E-Trade brought to them, and of course now with Equity Zen.

00:50And so really two years ago, we began planning out, well, what does the future of private markets look like?

00:55IPOs aren't happening as much, private companies are growing, value creation is happening in a way that's

01:00outside of the scope of most public market investors.

01:03How do we bridge that gap at scale?

01:06And the result of last week's news is what we've been working on for a while.

01:10Well, what calmed my eye about the announcement was that terms of this deal weren't disclosed.

01:14There wasn't a number value attached there.

01:17And now that news of the deal has settled,

01:19can you give us some idea of how much this deal is actually valued at?

01:23Well, I can't give you any idea in terms of numbers.

01:28What I can tell you is Equity Zen and Morgan Stanley coming together is one of those rare deals where literally every stakeholder is happy.

01:37You have Equity Zen shareholders who have, you know, are going to see a phenomenal return.

01:42You have Equity Zen shareholders and employees who are themselves going to have a wonderful place to go to,

01:48and with a large capital investment that Morgan Stanley is going to make to further the mission of Equity Zen.

01:54And Morgan Stanley is happy because Equity Zen, by the way, is a relatively capital efficient business.

02:00We've raised the grand total of $7 million in outside capital, last raised capital 10 years ago,

02:06and have really shown that it's possible to run a profitable business, technology driven, and in our case, mission driven as well.

02:12So, sorry, Katie, no numbers here, but what I can tell you is one of those rare deals where all sides are happy.

02:18All right, Atish, we'll let you off the hook on that one.

02:20I am curious, though, about the structure of the business going forward,

02:23particularly as it relates to the relationship that you have with the companies that are listed on the platform here.

02:29They are going to have more say?

02:31Is that what I'm understanding as this gets integrated into Morgan Stanley?

02:35Absolutely, and by the way, let me be clear.

02:38Equity Zen itself ran a business independently while giving issuers, the companies, a seat at the table.

02:44So, a traditional marketplace has buyers and sellers.

02:47Private company stock is a three-sided marketplace.

02:50You have buyers and sellers, but ultimately what you need is the issuer's blessing,

02:53the company to actually go ahead and say, hey, this is my cap table.

02:56This is the final record of who owns my shares.

02:59And so, Equity Zen has run a business for the last 13 years is by getting the issuer's blessing,

03:04by being an issuer-friendly platform.

03:06And guess what?

03:07There's no way Morgan Stanley, with its world-class investment banking and capital markets franchise,

03:12but also on the wealth management side, they have Solium Shareworks, they have MS at Work,

03:17they have an entire liquidity provision platform.

03:20They're all about issuer buying.

03:22And so, I think really this was a really good match made together with two firms that believe

03:27that issuer needs to be at the center of these discussions and to give them really a much more robust remote control.

03:33I completely understand why Morgan Stanley would be interested in your business,

03:37particularly with regards as they try to funnel more through that wealth,

03:40funnel some of these assets more through the wealth channel.

03:42But it has raised questions, as you know, about the issue of transparency and liquidity.

03:47You talk about the 13 years that you've been in business, Atish.

03:51How has that transparency and liquidity improved, if at all, through your platform?

03:56Yeah, absolutely.

03:57Look, 13 years ago, I would say there was very little awareness of what these large private companies were doing,

04:05how large they were, even in some cases who their management team was.

04:10Today, I think even on EquityZen's platform alone, and we power the platforms of, you know,

04:16large financial publications like, you know, where folks can go and take a look at private

04:21and public company information together, we provide that information to hundreds of millions of users

04:26who want that information available.

04:28So certainly in the last decade, a lot more information is becoming available.

04:31But to your point on transparency, Romain, I think one of the key things we see is,

04:36take a look at OpenAI.

04:37Now there's equity research coverage on a private stock that used to never happen before.

04:42And OpenAI is just really the first.

04:44We're going to start seeing the top 10 companies in the private markets continue to get coverage,

04:49you know, equity initiation reports kind of across the street.

04:53So is it necessarily going to be government mandated that public closures available?

04:57I don't think so, not for a while.

04:59But I do see there's going to be a lot more public market information available about private companies.

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