EquipmentShare Carta Cross

EquipmentShare partnered with CartaX to offer a unique employee liquidity program, and became the first company to launch a Carta Cross on the CartaX platform, outside of Carta, Inc.

Summary

EquipmentShare is a digitally native rental business that recently raised Series D financing to continue building connectivity for the construction industry. The company is growing fast—and retaining, rewarding and attracting top talent is crucial to maintain their pace. In September 2021, EquipmentShare held its first Carta Cross auction, which returned millions of dollars in value to early employees and investors.

• EquipmentShare is the first company to launch a Carta Cross on the CartaX platform, outside of Carta, Inc.
• CartaX gave EquipmentShare broad visibility to a diverse set of investors, including venture capital firms, hedge funds, family offices, and direct secondary funds.
• The auction resulted in robust buy-side demand and market-driven price discovery.
• The company is continuing to partner with CartaX to create more opportunities for employee liquidity.

Overview

On July 20, 2021, EquipmentShare announced a $230M Series D round of financing. The capital raised will help the company expand its national footprint and launch T3, a new core technology solution for the construction industry.

Following the close of the round, co-founders Willy and Jabbok Schlacks shifted their focus to employees. They wanted to offer a unique benefit that would allow eligible employees to unlock the value of their equity in the company.

EquipmentShare turned to CartaX to design a structured liquidity program for their employees, with the following objectives in mind:

• Return value to employees: Help their employees achieve liquidity through the sale of a portion of their vested equity compensation
• Price discovery: Use CartaX to permit controlled bidding of shares in order to gauge market sentiment on their valuation without dilution
• Control and alignment: Maintain long-term shareholder alignment and control over participation
• Investor relations: Expand EquipmentShare’s investor network beyond the traditional venture ecosystems to aid in the strategic growth of the company

Process and timeline

EquipmentShare onboarded on CartaX in August. The CartaX team then analyzed the company’s needs and proposed a liquidity structure, or the total volume that eligible shareholders were permitted to transact. For this transaction, EquipmentShare allowed employees and early investors to sell a portion of their equity based on a set participation cap.

Afterward, the CartaX team helped facilitate meetings between EquipmentShare’s executives and engaged investors to discuss the potential for strategic investments. Once the transaction launched, buyers and sellers were able to confidentially place orders. After 16 business days, the auction closed and settled.

Investor engagement

EquipmentShare wanted to share its story with a broader set of institutional investors. The CartaX team leveraged its investor network to arrange a live Investor Day where the company could answer questions about its business and financials. CartaX assisted on the investor presentation and managed the live event end-to-end, including audience experience, investor outreach, speaker prep and logistics. A diverse set of investors were invited to participate in the Carta Cross, including hedge funds, venture capital firms, family offices, direct secondary funds, and other sophisticated investors.

Before the transaction began, investors could access a secure virtual data room to begin their analysis and come prepared with thoughtful questions as the auction approached.

Employee education

Access to disclosure materials, transaction information, and transcripts of the Investor Day live Q&A were made available to all participants, including employee sellers. To maintain confidentiality of company data, access was granted only to those who signed an NDA on the CartaX platform.

CartaX held a town hall to help eligible employees learn more about the platform and the auction mechanics. CartaX also provided resources to employees on “growth-selling,” a portfolio diversification strategy in which holders sell shares gradually as the price of the company increases. Using the custom growth-selling calculator CartaX provides, sellers could set preferences that automatically generate a set of orders for the Carta Cross auction, rather than having to decide individual sell quantities.

Results

With the Carta Cross, EquipmentShare was able to facilitate liquidity for their employees and solve for price discovery in one transaction.

The company had a high participation rate, with 93% of participating sellers completing trades and 79% of total sell orders filled. On the buy-side, 83% of bidding investors received allocations in the transaction, with most meeting their intended investment goals.

CartaX gave EquipmentShare broad visibility to a new set of investors who were previously unfamiliar with the business. This led to strong buy-side demand. As a CartaX-onboarded company, EquipmentShare now has the ability to offer liquidity to shareholders on a recurring basis.

Carta Cross is the CartaX auction process, designed to efficiently identify a market driven price and allow equity holders to sell holdings to investors. “Cross” is used in the world of financial markets to indicate that it is a method for matching supply and demand to arrive at a market clearing auction price.

Under US securities law, every offer and sale or resale of a security must either be registered with the SEC or exempt from the registration requirements of the Securities Act of 1933 (the Securities Act). However, private sales of unregistered securities may occur subject to statutory exemptions and certain codified common law exemptions, and as such, all transactions facilitated on CartaX qualify under one or more appropriate secondary market registration exemptions. Securities purchased on CartaX are not freely tradeable. No public market exists for securities traded on CartaX and that there can be no assurance that a public market for such securities will ever exist. Securities purchased on CartaX may not be transferred unless such securities are registered under the Securities Act or other applicable securities laws or unless exemptions from such registration requirements are available. Only the Issuer of securities traded on CartaX may file a registration statement with the SEC or other applicable securities commissioners and the company is under no obligation to do so with respect to securities traded on CartaX. Exemptions from registration may not be available to purchasers of securities on CartaX, and therefore they may not be able to transfer or sell all or any of the securities in the future.

In order to be able to trade on CartaX, a participant must either be (i) a shareholder of a company whose shares are being traded on CartaX and be specifically permissioned by the company to sell some or all of Customer’s shares in a particular transaction, or (ii) an investor specifically permissioned either by the company to participate in a particular transaction. CartaX is not a continuous market. Transactions facilitated on CartaX are bilateral in nature, and there is never any guarantee that there will be sufficient counterparty interest to result in crossing interest. CCMX does not guarantee whether, nor the terms on which, any order may be filled. There is no guarantee of a participant being permissioned to participate in future transactions on CartaX.

Certain terms used herein may carry different meanings to how those terms might be used in other contexts, for example in relation to public markets, primary capital raisings, or initial public offerings. An explanation of such terms and their respective definitions in this context may be found here.

CCMX’s parent company, Carta, Inc., was a passive investor in this transaction through a special purpose vehicle (SPV). Investment discretion was delegated to the General Partner of the SPV, subject to an investment mandate. The SPV participated on the same terms as all other buyers and as with any other investor, its participation may have impacted the outcome of the transaction.

Testimonials and quotes may not be representative of the experience of other customers and past performance is no guarantee of future performance or success of future transactions on the platform.