Main Street Investors Are Turning The Tables On Wall Street’s Pros

My uncle would tell a story of his investment in McDonalds in the early 70’s.  He was blue collar worker with no experience or understanding of the markets. He talked about taking his family to the local McDonalds for the first time and the physical experience he had.  The smell of the food, the cost, the taste and the overwhelming experience of the family.  

He was an uneducated investor making an investment decision on personal experience. No internet, no financial advisor, no Robinhood or TD Ameritrade, no understanding of the market but a strong belief that this product was different.   

He sought out how and where to buy shares in McDonalds and I’m sure the execution cost far exceeded his initial investment.  My Main Street uncle had a steep learning curve to compete against the Wall Street Pros.But 50 years later Wall Street is in the midst of a wave of disruption that for the first time is allowing individuals access to trading opportunities, execution costs and valuations that previously have been the exclusive domain of large institutional players.

The driver of this retail phenomenon of course is technology, which for the last several years has been opening doors for the individual investor and leveling the Wall Street versus Main Street playing field.

But three events in the last few months have blown the doors wide open:

First, GameStop, which is a truly remarkable story of how a bunch of day traders without securities licenses squeezed the professional short traders and made a killing.  Through group chats on an electronic communications platform, access to real-time pricing and stock trades made through electronic retail brokers, the little guy could trade toe-to-toe with the big boys – and turn the table on Wall Street’s heretofore smart money. The rise of the machine has brought with it the rise of the retail investor.

The second event was the announcement late last year that the Securities and Exchange Commission approved a new kind of NYSE direct listing which could help startups save on bank fees and help their employees capture more of the gains in their share price when they go public.  Rather than having to wait to buy in the aftermarket, these direct listings will, as Acting SEC Commissioner Elad Roisman said, “provide fair and efficient pricing for participating investors. Utilizing such an auction may have the additional benefit of increasing opportunities for investors to purchase shares at the initial offering price.” 

And the final event is from my own shop, ClearList, an equities marketplace for private company securities. Genuine pre-IPO price discovery for private market shares has historically been a shot in the dark.  There is no market maker and no price transparency. Fees and costs for both the issuer and the investor are outlandish, to put it mildly. None of the electronic efficiencies found in the public markets are found in the private markets – even though the private market is larger.

Addressing the cost, transparency and limited access to the private markets is the ClearList mission. We are offering private companies and their existing investors an issuer-friendly platform, while democratizing investor access.  

I often think of my uncle’s McDonalds story and the investment criteria small investors would use to navigate trading decisions, if only they had had equal access.  I wonder about a taxi or limo driver who may have invested in Uber as an opportunity to hedge their current employment or if my kids, who grew up in a digital world, would have recognized the early potential of Facebook and invested.

But now the Ubers and Facebooks and McDonalds, and yes, even the GameStops, are increasingly accessible and those same types of companies in the future will be looked at and invested in at a fair and transparent price by all the little guys. The rules are being rewritten – everyone can get a first bite at an Apple or of a Big Mac.

About the Author 

Bill White is the CEO of ClearList, an equities marketplace for private companies, based in Manhattan. 

All securities and securities transactions offered by and through our SEC Registered Broker-Dealer ClearList LLC, Member FINRA & SIPC


Private Placement Disclosure: 

ClearList warns that investments in private, unregistered securities involves a high level of risk and may not be suitable for all investors. An investment in private company securities is highly speculative and should only be considered a long-term investment. Before deciding to invest, you should carefully consider your investment objectives, level of experience and risk appetite. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities, including on the ClearList LLC Alternative Trading System. There is also no guarantee that any private placement will be publicly listed through a direct listing or Initial Public Offering. You should be aware that each investment also carries its own specific risks and that you should complete your own independent due diligence regarding the investment including obtaining additional information, opinions, financial projections, and legal or other investment advice.

Risk Related to Private Securities:

Investing in private, unregistered securities is not suitable for all investors.  Investing in private company securities generally involves greater risks than investing in publicly traded securities.     Investing in private company securities involves risk of loss that investors should be prepared to bear.  Private company securities may be more difficult to buy and sell.  Trading opportunities may be more limited for private company securities that are not widely held.  There may be greater liquidity risk and the possibility that a security cannot be sold at an ideal time.  If this happens, an investor account may be required to continue to hold the security and losses could be incurred. 

Private Securities, as well as any particular investment, may not be suitable for everyone. With respect to any investment or security traded on the ClearList ATS we urge you to carefully evaluate its appropriateness for your situation.  You are strongly encouraged to complete your own independent due diligence before investing in private, unregistered securities, including obtaining additional information, opinions, financial projections, and legal or other investment advice.  Private, unregistered securities are also highly illiquid and there is no guarantee that a robust market will develop for such securities, including on the ClearList ATS.

No investment process is free of risk; no strategy or risk management technique can guarantee returns or eliminate risk in any market environment.  There is no guarantee that your investment processes will be profitable. Past performance is not a guide to future performance.  Any trading success enjoyed by others does not guarantee similar results for you. The value of investments, as well any investment income, is not guaranteed and can fluctuate based on market conditions.  Diversification does not assure a profit or protect against loss.

Affiliations – GTS Securities and/or GTS Execution Services may place orders on both sides of a market for private company securities traded on the ClearList ATS.  Both GTS Execution Services LLC and GTS Securities LLC are affiliates of ClearList LLC and ClearList Securities LLC through common ownership and all of these entities are registered broker-dealers.  Affiliates, officers, directors, and/or employees of ClearList LLC and/or ClearList Securities LLC may hold a position in the financial instruments of an issuer of private company securities wherein certain underwriting, private placement, or advisory services were performed and private securities of that issuer may be traded on the ClearList ATS.

Commissions/Transaction costs – Before you begin to trade, you should obtain details of all commissions and other charges for which you must be liable.

When products are purchased or sold, several types of incidental costs (including potential transaction fees and commissions) are incurred in addition to the current price of the security. These incidental costs may significantly reduce or even exclude the profit potential of the products.  In addition to such costs directly related to the purchase of products (direct costs), you must also take into account any follow-up costs (such as custody fees). You should inform yourself about any additional costs incurred in connection with the purchase, custody or sale of a private security before investing. 

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