The chief executive of a leading London-listed fintech investor has cast doubt on the UK government's proposed scheme to boost trading in private company shares, warning that significant questions remain unanswered.
CEO Voices Liquidity and Valuation Concerns
Tim Levene, the head of Augmentum Fintech, has publicly expressed reservations about the planned initiative aimed at making it easier for retail investors to buy and sell shares in unlisted businesses. Speaking to Financial News London, Levene stated there are "lots of questions" surrounding the practicalities of the scheme, which was a key proposal in last year's Edinburgh Reforms.
The core issue, according to Levene, revolves around creating a functional and liquid market for these inherently illiquid assets. "How do you create a liquid market in something that is fundamentally illiquid?" he asked, pinpointing the central challenge. He further highlighted the difficulty of accurately valuing private companies without the transparent price discovery mechanism of a public market.
Balancing Access with Investor Protection
The proposed private share trading scheme forms part of a broader government strategy to channel more investment into high-growth UK companies and democratise access to private markets. However, Levene's comments underscore the tightrope regulators must walk between increasing access and ensuring robust investor protection.
Augmentum Fintech, which invests in companies like Tide and Zopa, has a vested interest in a healthy ecosystem for private company investment. Levene's scepticism therefore carries considerable weight within the financial and technology sectors. His concerns suggest that without careful design, the scheme could expose less-experienced investors to disproportionate risks associated with:
- Price volatility: Due to low trading volumes and opaque valuations.
- Liquidity risk: The potential inability to sell shares when desired.
- Information asymmetry: Private companies have far fewer public disclosure requirements than listed ones.
Industry Awaits Crucial Details
While the ambition to foster a more dynamic investment landscape is widely supported, the fintech leader's intervention indicates that the devil is in the detail. The Treasury and the Financial Conduct Authority (FCA) are expected to consult on the specifics of the scheme later this year.
Levene's remarks will likely feed into this crucial debate, pushing authorities to address fundamental questions about market structure, participant eligibility, and safeguards before launch. The success of the initiative may hinge on its ability to provide a credible platform for trading while honestly communicating the unique risks of private equity to a broader audience.
The outcome is significant for the UK's competitiveness as a global fintech hub. A well-functioning scheme could unlock new capital for innovators, but a poorly executed one could lead to investor losses and reputational damage. All eyes are now on policymakers to provide clear and workable answers to the questions raised.
