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How Mexico’s Pemex went from cash cow to financial drain



Good morning. Our top story today comes from Mexico — a tale of the colossal price the country is paying to keep funding the state-owned oil and gas company, Pemex.

Our second note is on how the American Petroleum Institute, Washington’s powerful oil lobbyist, plans to deal with a new US government led by the man who said, ahead of the election, he would bring a “transition away from oil”.

The key points from consultancy McKinsey’s annual energy outlook, new forecasts from the Energy Information Administration, and some brutal clean energy job losses round out today’s newsletter.

Thanks for reading. Please get in touch at You can sign up for the newsletter here. — Derek

Mexico’s former cash cow drains the nation’s wallet

Propping up state oil company Pemex is costing Mexico’s cash-strapped government at least 1.4 points of GDP a year, according to Moody’s Investors Service and a senior former public official.

Pemex is a priority of populist President Andrés Manuel López Obrador, who sees the former monopoly as a lever of national development. He is investing heavily in a new refinery despite the company’s downstream activities losing money hand over fist and the firm suffering negative cash flow overall.

“Supporting Pemex in 2021, for the company to cover its financing needs, could impose a financial burden of up to $14.7bn or 1.4 per cent of GDP on the sovereign, in addition to the already budgeted transfer of $2.3bn to build the Dos Bocas refinery,” Moody’s said in a report.

That, however, is just to keep things muddling along for Pemex, rather than allowing it to boost production significantly.

“If the government was to provide additional capex of $10bn, which we estimate is the amount required on an annual basis to lift production on a sustained basis, the cost would rise to around $25bn or 2.3 per cent of GDP each year,” Moody’s said.

That chimes with the estimates of a senior public official, who told the FT that Pemex had “burnt through 300bn pesos” in 2020 — some 1.5 points of GDP. “It’s an incredible amount,” added the former official, who expected the company to need state support “very soon in 2021”.

The government has resorted to increasingly creative ways to help the nation’s former cash cow, as the nationalist Mr López Obrador continues to prohibit Pemex from sharing risk by partnering with private companies in exploration and production.

Supporting state oil company Pemex is placing an enormous burden on the Mexico’s government. © REUTERS

Nymia Almeida, Moody’s senior vice-president and a Pemex analyst, said that last year Pemex had been given about half the aid it received in 2019. That it had managed to keep production about stable when its main fields were mature and declining at 25 per cent a year was no mean feat, she said.

“The challenges are still the same: high tax and debt,” Ms Almeida said. Pemex is already the world’s most indebted oil company, with net debt of $110.3bn at the end of the third quarter of 2020 and $6bn due this year.

Pemex’s debt has already been downgraded to junk but could be at risk of further pressure if Mexico’s sovereign debt rating is cut — something that is no longer most analysts’ base case for this year unless economic recovery is badly delayed.

“The main trigger [to downgrade] Pemex is the sovereign,” said Ms Almeida. “In other years, it’s been the other way round.” (Jude Webber in Mexico City)

API readies to face off against the Biden administration

The American Petroleum Institute laid down battle lines with the incoming Biden administration during the group’s annual “State of American Energy” event yesterday.

Mike Sommers, the API’s president, said he “looked forward to working with” the new administration. But his speech made clear that there will be many more areas of conflict than co-operation.

On a federal leasing ban:

In response to the Biden team’s proposal to restrict drilling on federal land, Mr Sommers zeroed in on New Mexico — home to a fast-growing area of the Permian basin.

He argued a ban could cost New Mexico billions of dollars in state revenue and tens of thousands of jobs, appealing directly to Deb Haaland, a congresswoman from the state who Mr Biden has nominated to head his Interior Department.

“I hope that the new secretary of Interior, despite her previous positions on our industry, comes to understand the importance of development of our federal lands,” Mr Sommers said.

API boss Mike Somers said he ‘looked forward’ to working with the Biden administration. © Bloomberg

On new pipeline projects:

Mr Biden will be under pressure from progressives in his party to block construction of new oil and gas pipelines. Major projects like Keystone XL and the Dakota Access Pipeline hang in the balance.

“Each one of them is a magnet for obstruction and litigation,” said Mr Sommers, arguing the US would need “many more miles” of pipelines in the years to come.

On the California model:

Mr Sommers painted California as a cautionary tale to make a case against deploying clean energy mandates to achieve emissions targets. Mr Biden wants to make the grid emissions-free by 2035.

“California is trying to force an energy change that it simply isn’t ready for and technology doesn’t exist to support, putting its residents at risk,” Mr Sommers said pointing to a spate of blackouts during last Summer’s heatwaves. “No one should be surprised when reality keeps interfering.”

(Justin Jacobs)

McKinsey throws cold water on the outlook of a warming planet

The energy transition is accelerating, but the rise of renewables and peaking of fossil fuels will not happen fast enough to prevent catastrophic climate change.

That’s the gloomy takeaway from McKinsey & Company’s big new Global Energy Perspective report.

Some of its other conclusions:

Green power is king . . . Renewables will dominate the electrification trend: they will be cheaper than the marginal cost of fossil fuel plants by 2030 and account for half of power supply by 2035. Green hydrogen will be cost competitive in the 2030s (and a $100 carbon tax of around $100 per tonne would boost hydrogen demand significantly).

. . . but fossil fuels will stick around. Oil consumption will peak in 2029, followed by natural gas in 2037. Coal peaked in 2014 and will keep falling. But fossil fuels will still meet more than half of energy demand by 2050 and oil and gas will still suck up 50 per cent of investment by 2035.

The outlook for climate is bleak. Emissions need to halve by 2030 to restrict global warming to 1.5ºC warming — the threshold to avoid drastic global warming effects, says McKinsey. But energy-related emissions will remain flat until 2030, in the consultancy’s reference scenario, and then fall by just 25 per cent by 2050. Emissions in 2050 in McKinsey’s reference case are seven times higher than in its 1.5ºC scenario.

Policy is key to the energy transition. The pace of the energy shift remains swift. Wind costs have fallen by almost half in the past 10 years; those for solar and battery by 78 per cent. In 2017, 70 cities had announced measures against internal combustion engines. That number now sits at 200. Policy is what matters, McKinsey believes. (Derek Brower)

Data Drill

Coal-fired electricity generation is set to rise in the US over the next two years — and with it carbon emissions, according to the US Energy Information Administration’s latest Short Term Energy Outlook.

As we reported in November, an anticipated rise in natural gas prices will push power generators back towards more economical coal in the near term. The EIA now estimates the cost of gas-fired generation will jump by more than 40 per cent this year. As a result, coal’s bounceback will continue beyond 2021 and into 2022.

Line chart of US electricity generation by source (%) showing Coal-fired power is set to rebound over the next two years

That will, in part, ensure that last year’s pandemic-induced fall in greenhouse gas emissions is short-lived. As coal usage rises, so will the energy sector’s CO2 pollution.

Line chart of Million tonnes CO2 showing US energy emissions will return to growth in 2021 and 2022

Power Points

  • Japanese electricity prices hit all-time highs as a cold snap coincided with tight LNG supplies, raising fears of blackouts.

  • River dams in the US are gaining attention as a potential zero-carbon electricity source amid a truce between environmentalists and the hydropower industry. 

  • The scrapping of plans to build an export terminal on the Pacific coast scuppered US coal miners’ last-ditch hope for shipping big volumes to Asia.


The pandemic was terrible for oil and gas jobs. But clean energy employment was hit hard too — and is struggling to bounce back.

Despite the addition of almost 17,000 jobs in December, around 429,000 people previously employed by the sector remain out of work, according to an analysis released yesterday by BW Research Partnership. A staggering 70 per cent of the jobs lost have yet to be recovered.

Gregory Wetstone, chief executive of the American Council on Renewable Energy, described the sector’s recovery as “anaemic” and called on the incoming Biden administration to “finally enact the kind of comprehensive, long-term, scientifically-driven climate policy that puts millions to work”.

The president-elect has pledged to bolster the sector with the investment of $2tn in clean energy jobs (though he will probably struggle to get the full amount through Congress).

That support will need to come quickly. At the current rate of recovery, BW reckons, the sector will not reach pre-Covid employment levels until 2023. 

Energy Source is a twice-weekly energy newsletter from the Financial Times. It is written and edited by Derek Brower, Myles McCormick, Justin Jacobs and Emily Goldberg.

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Hedge fund manager Hohn pays himself $479m




Billionaire hedge fund manager Sir Christopher Hohn has paid himself a dividend of $479m, one of the largest-ever annual personal payouts in the UK, after profits at his firm more than doubled last year.

Hohn, who is founder of Mayfair-based TCI Fund Management and one of the UK’s biggest philanthropists, made the payment to a company he controls during the year to February 2020, according to regulatory filings.

TCI, which manages more than $45bn in assets and tends to bet on rising rather than falling prices, has been a big winner from the bull market of recent years. During 2019 it made $8.4bn worth of profits for investors, according to LCH Investments, profiting from gains in stocks including Alphabet, Charter Communications and Canadian Pacific Railway.

TCI Fund Management’s profits for the year to February 2020 jumped 108 per cent to $670.9m. The $479m dividend was then paid to a separate firm TCI Fund Management (UK). Both companies are controlled by Hohn.

TCI declined to comment. The payment was first reported by The Guardian.

While the payout beats the £323m paid to Bet365 boss Denise Coates in 2018, much of it has been reinvested in TCI funds, filings show. It is also far from the biggest-ever hedge fund payday, being dwarfed by sums such as the $3.7bn earned by US manager John Paulson in 2007 thanks to bets on the subprime crisis.

In 2014, during testimony in his divorce battle with estranged wife Jamie Cooper-Hohn, Hohn described himself as “an unbelievable moneymaker”. A High Court judge later awarded Cooper-Hohn a $530m divorce payout.

Hohn, who grew up in Surrey and is the son of a Jamaican car mechanic, is known as one of Europe’s most aggressive activist investors. A backer of climate group Extinction Rebellion, he has been vocal in recent years in pushing companies to improve their climate policy, for instance threatening to sue coal-financing banks and warning his fund will vote against directors whose companies do not improve pollution disclosure.

In October Spanish airports operator Aena bowed to pressure from Hohn’s fund, becoming the first company in the world to give shareholders an annual vote on its climate policy.

Through his charity The Children’s Investment Fund Foundation, which in 2019 approved $386m of charitable payouts, he wrote to seven of the world’s biggest asset managers, urging them to put pressure on companies over climate policy.

Last year TCI was one of a number of funds looking to raise fresh assets from investors after suffering losses during the pandemic. It was also one of the big winners from betting against collapsed German payments group Wirecard, making as much as €193m in a week, according to data group Breakout Point.

Hohn’s fortune was estimated last year at £1.3bn by the Sunday Times Rich List.

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FCA first alerted to concerns over Neil Woodford’s business in 2015




The Financial Conduct Authority was warned about problems within Neil Woodford’s investment business less than a year after it opened in 2014 but did not intervene for almost another two years, according to several people briefed on the process.

Woodford recently announced plans to relaunch his career at a time when the regulator faces pressure from politicians and campaigners critical of its oversight of the stockpicker’s failed business — and over how long it is taking to investigate his downfall.

The onetime star fund manager was forced to suspend his flagship £3.7bn investment fund in June 2019, trapping the savings of hundreds of thousands of investors in the biggest British investment scandal for a decade.

But concerns over its investment strategy were raised within the first year of its operation, when two of the company’s founding partners — chief operating officer Nick Hamilton and chief legal and compliance officer Gray Smith — resigned after falling out with Woodford and chief executive Craig Newman.

Given their senior roles in such a high-profile business, Smith and Gray were asked to discuss the reasons for their departures in exit interviews with the FCA in January 2015. The FCA did not act on the information they presented, according to those familiar with the regulator’s dealings with the company.

The four founders had clashed openly over the company’s compliance culture and the level of due diligence carried out on Woodford’s investments in private companies, according to former WIM staff members.

Hamilton and Smith were especially concerned with the amounts being committed to unlisted companies.

In response to FT questions over the exit interviews, the FCA said: “Where we receive information relating to concerns about firms or individuals we follow up and take action where appropriate. But we do not conduct our supervision of firms or individuals in public.”

Smith and Hamilton declined to comment. Several former staff at WIM said they were unable to talk publicly about their departure from the company.

A spokesman for Woodford said: “It is true that the FCA did not approach us after the interviews, and I am sure would have approached us had there been any concerns raised from the interviews.” 

The spotlight falls on the FCA at a tricky time for the regulator as it seeks to draw a line under a spate of industry controversies during the tenure of its previous chief executive Andrew Bailey, now governor of the Bank of England.

A recent review of its handling of the £236m collapse of mini-bond issuer London Capital & Finance found repeated failures by the watchdog to act on external warnings. “The FCA’s handling of information from third parties . . . was wholly deficient,” the review concluded. “This was an egregious example of the FCA’s failure to fulfil its statutory objectives”.

Bailey took over as head of the FCA in 2016, after the contract of his predecessor Martin Wheatley was not renewed, and led it during both the Woodford and LCF collapses.

In February he told MPs on the Treasury select committee that when he joined the FCA it had “no system for extracting information” from warnings or tip-offs. “I’m not hiding things that went wrong,” Bailey said. “There should have been a mechanism to alert supervision and enforcement.” 

Nikhil Rathi, the FCA’s current chief executive, and Charles Randell, its chairman, will be quizzed by the committee on Monday about its handling of LCF.

While giving evidence to parliament in June 2019, Bailey said the FCA’s first intervention with WIM was at the end of 2016 when the regulator spotted a conflict of interest in the business’s valuation process. By this point WIM managed almost £10bn and was the UK’s sixth best-selling fund manager.

The FCA has been dogged by questions over its oversight of WIM having approved the business to start trading just months after it found funds managed by Woodford at his former employer, Invesco Perpetual, exposed investors to higher levels of risk than they had been led to expect.

Invesco Perpetual was fined £18.6m for the breaches, which also involved several funds not managed by Woodford, in what was a record penalty imposed on a UK fund manager. 

Woodford is still approved by the FCA to act as an executive director of an investment company, having updated his status in December 2019.

Ten days ago Mel Stride, chair of the Treasury select committee, called on the FCA to conclude its investigation into WIM’s implosion, saying: “As the FCA’s investigation still continues over 18 months after the fund was suspended, the reports of the new fund may understandably be of concern to investors who previously lost out.”

Owen Walker’s ‘Built on a Lie: The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money’ will be published by Penguin on Thursday

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Staying private: the booming market for shares in the hottest start-ups




In 2014, an Austrian entrepreneur offered investors a rare chance to purchase shares in Jumio, his fast-growing and profitable payments company. The deal was not a typical venture capital transaction. Instead of purchasing new shares, investors could buy out earlier shareholders, in what are known as private secondary transactions.

Daniel Mattes, who calls himself a “visionary” on his Instagram page and has been a judge on the Austrian version of Shark Tank, the American reality TV series for entrepreneurs, told at least one prospective buyer he had no plans to reduce his own stake in the business, according to a US Securities and Exchange Commission complaint filed in 2019. Mattes also signed off on documents that, according to the complaint, claimed Jumio made a small profit and revenues of more than $100m in 2013 — a significant sum for a three-year-old company.

Two years later, Jumio filed for bankruptcy, and the company’s shares became worthless. In reality, according to the SEC, Jumio had only made one-tenth of the revenues it claimed, and Mattes had bypassed his board of directors to sell about $14m of his own shares.

Jumio’s case highlighted the risks of an opaque but fast-growing corner of finance: the global market for shares in private start-ups such as TikTok owner ByteDance, Elon Musk’s SpaceX and payments company Stripe. In 2019, the market was estimated to host almost $40bn in lightly regulated trades, according to one participant, more than doubling its volume from 2014.

Attendees wear costumes at a TikTok Creator's Lab hosted by ByteDance in Tokyo. The global market for shares in such private start-ups is an opaque but fast-growing corner of finance
Attendees wear costumes at a TikTok Creator’s Lab hosted by ByteDance in Tokyo. The global market for shares in such private start-ups is an opaque but fast-growing corner of finance © Shiho Fukada/Bloomberg

Recently, the market has been hotter than ever. Though private companies have largely tried to restrict trading, brokers say hedge funds, mutual funds and other institutional investors have begun pouring in, buying large blocks of existing shares in start-ups that are nearing initial public offerings or big acquisitions. Often, the investors receive scant rights to information on financial performance.

Technology upstarts and financial institutions including big banks have rushed to capitalise on the interest by brokering deals and forming trading venues, setting up a battle that could fundamentally alter the market’s structure and potentially allow companies to stay private indefinitely.

The boom reflects how cash-flush investors are clamouring for stakes in fast-growing businesses, with low interest rates pushing non-traditional funds deeper into private markets. To meet the demand, brokers now face two key challenges: increasing the supply of shares in desirable companies while preventing fraud and manipulation in a competitive market.

Until recently, private secondary markets resembled “that guy with a trenchcoat that’s selling you watches in Times Square”, says Inderpal Singh, who leads a private secondary market project at the start-up marketplace AngelList. “In the last year, there’s been a big shift.”

chart showing the growing trading volume in private markets

In addition to AngelList, JPMorgan and the software start-up Carta have begun facilitating trades in private companies. They compete with established players like Nasdaq and Forge Global, which purchased the rival marketplace SharesPost in a $160m deal last year, as well as scores of smaller independent brokers.

Carta and some other intermediaries have advocated that the SEC relax restrictions on who can purchase shares in private companies, potentially opening up the market to a broader swath of investors.

But some observers remain sceptical that the growing market can protect investors against bad actors. Mattes, who paid $17m to settle the charges, did not admit or deny the SEC’s allegations, though he resigned from Jumio in 2015 following an internal investigation. The entrepreneur did not respond to questions sent to his personal website.

The rush to expand trading could lead to fraud and manipulation, says Stephen Diamond, a professor of law at Santa Clara University who has studied private secondary transactions.

“All too often in Silicon Valley, people want to basically ignore the consequences of unhealthy market structures,” Diamond says.

Facebook's initial public offer is displayed on a news ticker in New York in 2012. The IPO created a frenzied market where independent brokers facilitated thousands of trades with little oversight from the company
Facebook’s initial public offer is displayed on a news ticker in New York in 2012. The IPO created a frenzied market where independent brokers facilitated thousands of trades with little oversight from the company © Michael Nagle/Bloomberg

The Facebook episode

The debates reflect a decade-long shift in capital markets as companies grow larger than ever in private — securing billion-dollar valuations and “unicorn” status while pushing back their public debuts. As a consequence, start-ups, investors and employees have accumulated trillions of dollars’ worth of shares that cannot easily be bought and sold, barring a public listing or acquisition.

Private secondary markets grew in importance in the lead-up to Facebook’s initial public offering in 2012. Investors rushed to buy the social media company’s shares, creating a frenzied market where independent brokers facilitated thousands of trades with little oversight from the company.

The trades created headaches. One Facebook executive left the company after he reportedly purchased stock ahead of a big funding announcement. Facebook sometimes lost track of who owned its shares, complicating preparations for its IPO.

Facebook’s struggles caused many start-ups to adopt strict clauses in their legal documents that prevented employees from trading shares without company approval. Some companies have gone even further, requiring sellers to receive approval from boards of directors months in advance of any transaction.

Though the restrictions have made trading difficult, brokers say the market has been busier than ever in the past 12 months, with big investors such as Tiger Global Management hunting for shares in start-ups that look like sure bets for blockbuster public listings.

Tiger Global has used secondary sales to gain stakes in companies such as China’s ByteDance and the software group Snowflake, according to fund documents and people familiar with the trades. Other hedge funds and mutual funds routinely purchase new stakes in companies worth tens of millions of dollars, brokers say.

Conference-goers at a Stripe booth during a GeekWire summit in Washington. The boom in private secondary markets reflects how cash-flush investors are clamouring for stakes in fast-growing businesses
Conference-goers at a Stripe booth during a GeekWire summit in Washington. The boom in private secondary markets reflects how cash-flush investors are clamouring for stakes in fast-growing businesses © David Ryder/Bloomberg

On the other side of the trades, existing shareholders such as venture capitalists have sought to unload stakes in highly-valued companies as they delay public listings. The market can also be an important source of cash for start-up employees, who receive a large portion of their pay in stock options.

Several new entrants, such as Carta’s private stock exchange CartaX, now hope to formalise the market and capture trading fees that have been spread between dozens of independent brokers.

“There is now, in the past few years, not a push to go all the way back to the days of strict prohibitions on secondary trading, but a push to have more avenues for organised liquidity,” says Cameron Contizano, a partner at law firm Goodwin Procter who works on secondary transactions.

Meanwhile, investor demand has pushed up prices for companies such as ByteDance, SpaceX and Stripe. Barrett Cohn, chief executive of the private securities broker Scenic Advisement, says he advised companies on twice as many secondary transactions in 2020 compared with the previous year. Of the last dozen deals Scenic worked on in the past few quarters, only one resulted in shares being sold at a discount to a company’s most recent stock price, he says.

Competing for business

The rise in trading volumes and the rush to capture the market will shape the way private shares change hands. San Francisco-based Carta, a company best known for selling shareholder management software to start-ups, has become a lightning rod in debates about the market’s direction. Its 45-year-old chief executive, Henry Ward, has set out an ambitious goal to build the “private stock exchange” for tech start-ups.

Ward wants the CartaX marketplace to compete with the Nasdaq exchange, providing a listing venue where companies could potentially stay private indefinitely. The exchange uses an auction model that Ward says will result in superior prices for sellers.

But the project has already drawn strong responses from rivals and market participants. Some brokers and start-ups say CartaX amounted to an attempt to monopolise the market, and the company is naive to think it could unseat public exchanges. Scenic’s Cohn says Carta has made it increasingly difficult for its clients to export their shareholder data for use in other kinds of secondary transactions, such as tender offers.

Marc Andreessen, the Netscape co-founder and Carta board member. Platforms like CartaX may struggle to meet their targets if private companies remain selective about who owns their shares
Marc Andreessen, the Netscape co-founder and Carta board member. Platforms like CartaX may struggle to meet their targets if private companies remain selective about who owns their shares © David Paul Morris/Bloomberg

“We’re not trying to make the New York Stock Exchange go away,” says Kelly Rodrigues, chief executive of the brokerage Forge, which has begun offering software that companies can use to manage secondary transactions. Forge also bills itself as the “stock market for private companies”.

Others say the most desirable start-ups would not want to use CartaX because few private companies want to subject their shares to monthly or quarterly auctions marketed by the exchange.

Eric Folkemer, head of Nasdaq Private Markets, says it has already set up a similar marketplace with price discovery tools for companies such as the workplace collaboration company Asana that want to facilitate trading in their shares before going public.

“We have it,” says Folkemer. “The question is, does the market want it?”

JPMorgan has put its money behind Zanbato, a private share trading system that is taking a different approach from Carta, acting as a central matchmaker for more than 100 banks and brokers executing orders on behalf of clients.

Nico Sand, chief executive of Zanbato, says the exchange has made a conscious choice to focus on trades between large, qualified buyers with more than $100m in assets, who regulators assume have high amounts of financial expertise and require less oversight.

Zanbato has applied for a patent for a trading system with “firm orders”, a legal contract that forces buyers and sellers to transact shares in a private company after they have submitted orders with desired prices and quantities, says Sand.

He says the concept, which is standard in public markets, is necessary for creating efficient trading in private shares. “At the end of the day, it comes down to formalising the market structure in a way it’s not currently formalised.”

Chart showing trading activity on private stock trading platform Zanbato

‘The third configuration’

So far, Carta is the only company that is listed for trading on CartaX. This month, investors purchased almost $100m in shares following the company’s first auctions on the exchange, in trades that valued the company at $6.9bn — more than double the valuation it received from venture capitalists less than one year ago.

Marc Andreessen, the Netscape co-founder and Carta board member, said in a blog post that he would encourage start-ups backed by his venture capital firm Andreessen Horowitz to consider listing on the exchange. He also said the firm would buy shares in companies on the exchange.

“The third configuration — beyond the false binary of simply private or public — is here,” Andreessen wrote.

But Ward has set targets for the exchange that some people familiar with its workings described as overly ambitious.

A SpaceX rocket lifts off from Cape Canaveral, Florida. The company is one of the most active companies in secondary trading and hosts an internal marketplace where employees and venture capitalists can sell stock to invited investors
A SpaceX rocket lifts off from Cape Canaveral, Florida. The company is one of the most active companies in secondary trading and hosts an internal marketplace where employees and venture capitalists can sell stock to invited investors © Craig Bailey/USA TODAY NETWORK/Reuters

Ward told investors he expected CartaX to generate about $1.1bn in annual revenues by 2024, according to a presentation viewed by the Financial Times. Under the most optimistic scenario, the marketplace would bring in $3.9bn in revenues that year, the presentation said. Carta declined to comment for this article.

CartaX charges 1 per cent fees to both buyers and sellers, implying it would need to facilitate about $55bn in trades a year to reach Ward’s expectations.

Those volumes would require about 3 per cent of the shares in all billion-dollar start-ups to change hands every year, according to Financial Times analysis of data from CB Insights, which estimates that 546 “unicorns” hold a collective value of $1.8tn.

Platforms like CartaX may struggle to meet their targets if private companies remain selective about who owns their shares. SpaceX, one of the most active companies in secondary trading, already hosts an internal marketplace where employees and venture capitalists can sell stock to invited investors.

“They have a lot of demand from buyers,” says Hans Swildens, chief executive of Industry Ventures, which has invested in Carta. “The question, like all the other marketplaces, is supply.”

Venture capitalists say the new exchange could also face competition from an unlikely source — special purpose acquisition companies (Spacs), which have recently lured relatively young start-ups to public markets.

CartaX would force companies to share two years of financial statements prepared using generally accepted accounting principles, in order to comply with a securities exemption the exchange is using to allow participation from an unlimited number of accredited investors.

Lawyers and governance experts say the requirement could help solve inconsistencies in information disclosure in private markets. But others say it would be a burden for young companies, which often remain private to avoid sharing their financial information to a broad audience of investors, reflecting a central tension in the market as brokers and traders attempt to capitalise on the surge of interest in secondary transactions.

“The ‘move fast and break things’ culture of start-ups militates precisely against this,” says Diamond at Santa Clara University. “That, to me, is the fundamental paradox here.”

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