A celebrated Black investor and a securities lawyer are hard at work preparing to launch what they hope will become the second Black Wall Street.
Investor Bill Ellison has teamed up with lawyer Joe Cecala to create The Dream Exchange, the nation’s first Black-owned stock exchange. The Chicago-based exchange aims to list smaller companies that want to go public, particularly if they are minority-owned. Since announcing the venture earlier this month, Ellison said about 6,000 Black-owned companies have already reached out about listing on The Dream Exchange, which aims to go public as a listing site in late 2021. The exchange currently offers a free platform for businesses to connect to investors.
“There are a lot of small, minority businesses that want to see an opportunity for how they can participate and grow their company. We want them to be very successful,” Ellison told Built In. “By being successful, they’re going to create a lot of jobs for a lot of people, a lot of communities, and we’d love to see that.”
Stock exchanges generally make money by charging a fee to process deals, Cecala said. Brokerages today rely on AI-powered electronic trading platforms to close millions of deals per nanosecond. The replacement of fast-talking traders with robots has led to a decline in the total number of companies going public, since algorithms often prioritize the highest, fastest bid, Cecala said. As public capital markets are shrinking, the size of deals are growing.
Before 1999, a United States Department of the Treasury analysis found about 550 U.S. companies went public each year, the majority of which were valued under $50 million. By 2011, only 190 companies went public annually, and deal size generally exceeded $50 million.
By limiting the markets to only “billion dollar celebrity unicorn companies,” Cecala said startups that lack the flash but still offer valuable technology are often unable to even launch, since they cannot secure the money they need to hire employees and develop their products. This phenomenon heightens the institutional barriers Black founders face in receiving capital, Cecala said.
“There’s a ripple effect of really destruction of economic opportunity in a specific racial category,” Cecala said. “If there aren’t public companies, and that’s where job growth comes from, perhaps those communities are tremendously underserved. The need for a Black-owned stock exchange is incredibly important.”
The Dream Exchange plans to act as a platform for listing companies whose valuation falls below the $40 million minimum listing threshold required by the New York Stock Exchange.
Its creation continues a trend in recent years of alternative stock exchange models popping up, like the Investors Exchange in New York, the Long-Term Stock Exchange in San Francisco and the Members Exchange in New Jersey. All these platforms aim to move slower and offer all investors an equal opportunity to make deals. But, The Dream Exchange is the only to focus on bringing Black companies to market.
The 14-person venture is currently hiring “people who are familiar with creating market and trading technology,” Cecala said. Ellison, chairman of the Cadiz Capital Holdings, owns a majority of the exchange and acts as co-founder with Cecala, who brokered the merger between the NYSE and its current electronic trading platform.
“We’re looking at that to restore the marketplace for really quality, imaginative companies, especially in a diverse community where the capital is needed,” Cecala said.