Crowdfunding has evolved yet again, now with the introduction of a secondary market for assets and private investment offerings. PeerRealty, based in the Midwest, has recently announced the release of a new market that will provide investors with the opportunity to liquidate crowdfunded offerings and private placements. While PeerRealty has only been in the game for about a year, the company has grown rapidly and is set to become a significant contributor to the crowdfunding sector with the introduction of a new private exchange.
The Background Behind the New Market
Current users of PeerRealty will find the new secondary market platform relatively easy to use. Shares for crowdfunded offerings that were originally purchased via the PeerRealty portal are able to be resold using the secondary marketplace. SEC resale restrictions do apply. The portal serves as a type of stock exchange for buying and selling private investments from other participants within the same marketplace. Now branded as CFX: The Crowd Finance Exchange, the new marketplace was announced in mid-April and is planned to go line within the next two to three months upon completion of SEC regulatory procedures. PeerRealty has already completed the necessary back-end technology required to support the secondary exchange and even has a patent pending on the related process and technology.
How the Secondary Market Works
As a centralized asset exchange system, CFX will be responsible for managing the registration of assets. An internal transaction engine has also been built into the platform to assist in managing buy and sell orders as they come into the system. Such orders will be processed utilizing a matching algorithm that will place a priority on time and price. Through the CFX platform, it will become possible for the full lifecycle of an investment to be handled.
Now that a secondary market has entered the industry, the already rapidly growing crowdfunding industry could experience even more gains. According to a recently released report, the equity-based crowdfunding industry grew by more than 180 percent last year, raising $1.1 billion on various crowdfunding platforms.
Crowdfunding has become a wildly popular method for allowing real estate deal sponsors to obtain the funding they need to do everything from purchase properties to renovate and flip investments. On the individual investor side, crowdfunding has opened up real estate investing to a far larger pool of investors, while providing access to increasingly affordable investment opportunities. While the returns for crowdfunded deals are often quite lucrative, circumstances can always arise in which an investor may find the need to liquidate his or her assets and exit a deal prior to completion. With a new secondary market now being opened, investors will have the opportunity to do just that by liquidating assets they no longer wish to hold. The introduction of the new secondary market will also provide even more investment opportunities for individual investors who are on the lookout for new deals.
Whether the concept of a secondary market will catch on remains to be seen, but given the recent growth of the crowdfunding industry, a secondary market will likely be welcomed with open arms.