Commissions on SharesPost and SecondMarket: A Comprehensive Guide

When it comes to investing in private companies through secondary markets, services like SharesPost and SecondMarket have become increasingly popular. This article aims to provide an in-depth look at the commission structures and fees associated with these platforms.

Understanding these fees is crucial for investors planning to participate in private market investments. Whether you're a seasoned investor or a newcomer to private investing, having a clear grasp of the costs involved in your transactions can significantly impact your overall return. This guide will cover all you need to know about the commission paid on SharesPost and SecondMarket, including transaction fees and the impact on your overall investment.

Understanding SharesPost and SecondMarket

SharesPost and SecondMarket are leading platforms that facilitate the trading of privately held company securities. These platforms serve as intermediaries, enabling accredited investors to buy and sell ownership shares in private companies, with the ultimate goal of gaining liquidity and potential returns.

Commission Structures on SharesPost and SecondMarket

SharesPost

SharesPost charges a transaction fee based on the dollar value of the transaction. For most deals, SharesPost takes 5% of the amount. However, in certain cases, this can go up to 6.375%, subject to conditions and volume thresholds.

In addition to the transaction fee, SharesPost receives a proportion of the shares being purchased. Specifically, they retain 5% of the shares sold through their platform. This means that if the value of your shares increases, the overall cost to you can be more than just the transaction fee in percentage terms.

SecondMarket

The commission structure on SecondMarket is slightly different. They also charge a 5% transaction fee on the dollar value of the transaction. However, the way they handle the shares is a bit less straightforward. SecondMarket takes a larger share of the shares issued, with the exact percentage varying based on the seller and the specific deal. This means that instead of a fixed percentage, the number of shares you retain can be significantly reduced depending on the transaction terms.

The Impact of These Fees on Your Investment

While the 5% transaction fee on both platforms is manageable, the additional 5% retention of shares can have a more substantial impact on your overall investment. If the value of the shares increases significantly, it can reduce the actual return you see from the investment, as a portion of your shares is not yours to sell or realize gains from.

For example, if you purchase $100,000 worth of shares and the value increases by 20%, the total value of your investment would be $120,000. However, if SharesPost and your retained 10% of the shares, you would only be able to sell 90% of the shares, leaving a net increase in value of 18%, rather than the potential 20% you might have expected.

Best Practices for Navigating These Fees

Given the complexities associated with these fees, it's essential to understand the full impact on your investment and determine if the risks are worth the potential returns. Here are a few best practices to consider:

1. Carefully Review the Terms and Conditions

Before committing to any deal, make sure to thoroughly read and understand the terms and conditions. This includes the fee structure, the specific details of your share retention, and any additional costs that might apply.

2. Shop Around for Multiple Options

Consider exploring alternative platforms that might offer more favorable terms. While both SharesPost and SecondMarket are reputable, the fee structures can vary. Research and compare to find the best fit for your investment strategy.

3. Consider the Long-Term Impact

When making your investment decisions, think about the long-term implications of these fees. Keep in mind that the value of your shares may change, and the fees can impact your capital growth and return on investment.

In Conclusion

Understanding the commission structures on SharesPost and SecondMarket is crucial for any investor looking to gain exposure to private company securities. The 5% transaction fee, combined with the share retention terms, can significantly affect the net returns of your investment. By carefully reviewing the terms, considering alternative options, and weighing the long-term impact, you can make informed decisions that align with your investment goals and risk tolerance.

Key Takeaways:

SharesPost: 5% transaction fee, 5% share retention. SecondMarket: 5% transaction fee, variable share retention. Consider the comprehensive impact of these fees on your investment returns.

Related Keywords: SharesPost commission, SecondMarket fees, online secondary market transactions