Private Intermittent Secondary Capital Exchange System (“PISCES”) is a new type of stock market designed to offer investors in private companies to trade their shares periodically - shares which, until now, have been largely illiquid. PISCES represents a promising, albeit nuanced, innovation in the private capital markets.
Limited liquidity has long been a barrier to investing in private companies. With few opportunities for investors to exit, capital has often been locked up for years, slowing the reinvestment of funds into new investments and thereby stagnating growth. PISCES aims to open this up by enabling secondary share sales, allowing investors to recycle capital more efficiently. This could stimulate a more vibrant ecosystem for private company funding, giving investors both more frequent and easier entry and exit points.
For companies, the PISCES functionality provides a pathway for them to restructure their capital base. Original investors, such as friends and family, can be replaced by strategic or professional investors who bring more than just capital to the table. Participating in PISCES could serve as a preparatory stage for companies considering a public listing. The process necessitates improved governance, financial reporting, and professionalism, so they can demonstrate they have a well-run enterprise, making them more attractive to investors accustomed to listed stocks.
Existing investors who have met their financial objectives or are seeking liquidity may now have a new exit route that doesn’t require a full company sale or IPO. Similarly, after many years at the coal face some founders want to take some value off the table without having to surrender control to institutional investors, and PISCES can make this possible.
For some employees who have been enticed by equity incentive packages PISCES gives them a route to monetise their EMI and stock option schemes. This makes these packages far more valuable to staff and may prove useful in attracting and retaining top talent. In turn this means private companies can use more of their cash to grow the business rather than to incentivise staff.
Nuanced challenges
Despite its promise, PISCES is not without complexity. Unlike public markets where price discovery happens fluidly between buyers and sellers, PISCES relies on predefined valuation corridors set by the company. The effectiveness of this approach remains to be seen and could vary significantly across different scenarios.
Furthermore, the system is limited to secondary share trading only, so while PISCES allows shareholders to trade their existing shares, companies cannot sell new shares to raise new money for the company. This restricts its application to specific use cases, such as investor exits, incentive liquidity events, and capital structure optimisation.
Additional complications arise from the intricacies of many private company share tables, which are often layered with multiple share classes with differing rights, and with bespoke investment or shareholder agreements imposing rights or requirements on certain groups of shareholders. These complexities could pose hurdles to the kind of standardisation necessary for smooth and scalable transactions.
The regulatory framework around market abuse and insider trading is also less stringent than in the full listed markets. While retail investors are, for now, excluded thereby mitigating this risk to some degree, the onus remains heavily on the more sophisticated and institutional investors who can participate to exercise due caution.
The role of service providers: Our value proposition
As the private markets continue to develop, service providers focused on private markets like us can play an important role in the successful operation of PISCES. With a broad suite of capabilities across fund administration, capital raising and advisory services, corporate services, and custody and nominee administration, we are uniquely positioned to support both companies and investors navigating this new terrain.
Our administration of private funds means we can facilitate entry and exit transactions under the PISCES model for its fund manager clients. Our advisory teams can help companies understand varying PISCES platform rulebooks and so optimise their approach. Meanwhile, our business solutions division offers robust support to companies seeking to use PISCES, ensuring they can demonstrate high-quality disclosures and good governance, both critical for investor confidence.
Moreover, Apex Unitas, our private asset custody solution, offers a secure and fully administered environment for managing the operational complexity that comes with onboarding and looking after multiple new investors into private companies.
PISCES represents a significant step forward in bringing greater flexibility and sophistication to private market investing. While the road ahead will require thoughtful navigation of valuation mechanics, regulatory nuances, and structural complexities, the potential benefits—increased liquidity, improved governance, and broader investor access—are too compelling to ignore. As platforms and participants mature, PISCES could well become a foundational feature of tomorrow’s private markets.
