Xpert Financial Unveils the XPO -- Xpert Private Offering -- The IPO of the Private Markets

XPO Provides Private Companies Efficient Access to Capital and Liquidity Through Xpert ATS

SAN MATEO, CA--(Marketwire - February 9, 2011) - Xpert Financial, Inc. today announced that U.S.-based private companies can raise valuable growth capital through private offerings on Xpert ATS, an SEC-registered alternative trading system (ATS) built exclusively for private company securities. Xpert ATS is an electronic trading platform operated by Xpert Securities, a FINRA-registered broker-dealer and wholly owned subsidiary of Xpert Financial. The private offerings, known as Xpert Private Offerings (or XPOs), allow private companies and their shareholders to list primary and secondary shares, respectively, for purchase by investors that are pre-approved by the company. Xpert ATS also supports the subsequent secondary trading of private company securities, providing an immediate market for these newly issued shares and potentially increasing the company's valuation due to the elimination of the illiquidity discount.

"In our opinion, the process that many private companies follow to raise capital takes too long, costs too much and distracts management from competing and winning in their respective markets," said Thomas Foley, CEO of Xpert Financial. "We believe the XPO provides a much more streamlined and efficient process to raise this valuable growth capital, as well as provide liquidity for early employees and investors. It is implemented on a fully-electronic platform that enables the offering to be completed much more quickly, in a secure and company-controlled manner, while also providing investors all the information they need to make sound investment decisions."

Xpert Financial's XPO creates an electronic marketplace for private offerings of private company securities, opening up a much larger and more diversified pool of potential investors for these companies. Companies have complete control over investor selection, and approved investors gain secure, electronic access to audited financials and other standardized due-diligence information to help them make informed investment decisions. Capital is raised through a competitive bidding process using either a modified Dutch auction or fixed-price auction. Meanwhile, investors gain access to private company investment opportunities that were previously unavailable to them.

The XPO process can be broken into three phases (Preparation, Listing, and Private Offering), with each phase requiring roughly 2-4 weeks to complete. Following the successful completion of an XPO, the company's shares can then be listed on Xpert ATS Trading Floor. Interested private companies and investors can get more information by pre-registering at www.xpertfinancial.com.

[See Figure 1: The XPO Process]


There are roughly 190,000 private companies between $10 million and $500 million in revenue in the U.S.(1), yet only about 4,300 typically receive funding each year from venture capital or private equity firms, and roughly 360 achieve liquidity through a successful IPO or M&A event(2). Many of these private businesses need access to alternative sources of growth capital.

[See Figure 2: Private Companies in the U.S.]
[See Figure 3: Exit Events for Private Companies]

"The XPO was created for the tens of thousands of successful, job-creating, innovative businesses that require access to long-term capital to fund product development, hire more people, drive growth, or make strategic acquisitions," said Foley. "Either private company management or their investment banker can initiate the process and discover how to access capital from a diverse and unique set of investors with a focus on growth."


Prior to 2000, it was not uncommon for smaller companies to secure critical growth capital and liquidity through an initial public offering (IPO). Since then, however, the minimum size of a company going public has grown by an order of magnitude, and the time to get to a public offering has doubled from 4.5 to 9.6 years(3). As a result, smaller growth- and expansion-stage companies can no longer tap into this important source of capital and liquidity.

[See Figure 4: XPO – A Stepping Stone to the Public Markets]

In some cases, these companies turned to M&A transactions as means of capital and liquidity, but acquisitions can severely limit the options for management and cut off their path to growth as an independent private company. Secondary funds provided another source of capital and liquidity, but at a significant discount in valuation.

The XPO provides companies with an alternative source of capital and liquidity that can meet the needs of both shareholders and management while keeping the company on an independent path to an ultimate IPO in the public markets. Private companies can now raise capital without having to give up control of the company. And investors get access to the liquidity and quality company investment opportunities they seek, in a more efficient and controlled manner.

[See Figure 5: Xpert Private Market Fills Liquidity Gap for Private Companies]


Meanwhile, companies can enjoy the many benefits of remaining private as they continue to grow, including: focusing on the business' long-term success rather than short-term quarterly financials; lower costs and greater profitability without the upfront and ongoing costs of going public; better use of management time; and greater "privacy" with respect to financials, customers, and other company information.

In addition, it's been documented that companies that go public later (after $50 million in revenue) provide 3-year post-IPO returns of 35% to 40% for their initial public investors versus returns of -12% to 22% for those companies that go out earlier(4). Also by helping more private companies to get to the public markets, retail investors now have the opportunity to invest in these companies. 

[See Figure 6: Average 3-Year Post-IPO Buy-and-Hold Returns]


Xpert ATS was designed with the input of investment bankers to provide a rapid syndication and dealflow tool to give the investment banks increased access to private companies regardless of the stage they're in or their location within the U.S. It also improves banker access to qualified institutional buyers (QIBs) and accredited investors. With increased investor interest in private companies, strategic bankers need a platform that will allow them to vet and view potential shareholders of their clients' primary or secondary stock.

By enabling their clients to raise capital more efficiently and effectively via an XPO, investment banks can create relationships with private companies when they're smaller, increasing the size of their client base. Then, as the company grows using the capital provided by one or more XPOs, these relationships may eventually lead to an IPO or M&A transaction for the bank.

About Xpert Financial

From its inception in 2009, Xpert Financial has focused on building a platform that benefits companies and investors in the market for private company securities. The company, through its FINRA-registered broker-dealer subsidiary Xpert Securities, operates Xpert ATS, a fully-electronic Alternative Trading System for private company securities that is registered with the United States Securities and Exchange Commission. Xpert ATS supports both primary offerings and secondary trading of private company securities. Trading of private company shares are controlled by the issuing company. Private companies, qualified institutional buyers and accredited investors that are interested in more information may pre-register at www.xpertfinancial.com.


There can be no guarantee that the Xpert ATS trading platform will perform in the manner desired. Companies available for investment through the trading platform are not subject to the regulatory scrutiny required of publicly traded companies. Consequently, information upon which to make an informed investment decision may not be readily available.

(1) Source: U.S. Census Bureau
(2) Source: Thomson Reuters; National Venture Capital Association
(3) Source: Thomson Reuters; Dow Jones Venture Source
(4) Source: Initial Public Offerings: Tables Updated Through 2010, Jay R. Ritter, Cordell Professor of Finance, University of Florida

Contact Information:

Private Company and Investor Contact:
Nick Nolan
Xpert Financial


A Small Percentage of Private Companies Achieve Exit Events Figure 1: Private Companies Raise Capital and Achieve Liquidity through XPOs The Xpert Private Offering can be a Stepping Stone to the Public Markets The Xpert Private Market Fills Liquidity Gap for Growing Private Companies Figure 2: Tens of Thousands of U.S. Private Companies Seek Capital for Growth Average Three Year Post-IPO Buy-and-Hold Returns