As successive rounds of financing at higher prices raise their perceived worth, shares in private companies are increasingly alluring. Trouble is, when it comes to paying the electric bill, all that pretty paper can't hold a candle to U.S. currency. A major problem for private-stock grantees is liquidity. With no established market for the shares, how do you convert them to cash, outside of the company's or venture capitalist's own provisions (which often understate the value)?

It isn't problem that can be readily solved -- the Securities and Exchange Commission sees to that. But it could be. Among other SEC impedimenta to creating a commercial clearinghouse for the public exchange of private equity is a regulation well-known as Rule 144. That regulation generally applies to the restricted-from-sale nature of certain equities -- often the kind received by key employees. Restricted shares, and indeed any private-company equities, can be sold, but in the absence of a formal market, usually the sale is to a relative or to the company's treasury. You can't sell to a professional securities dealer, since by definition a dealer's business would be to try to resell such shares at a profit, and that is what the SEC won't abide.

Nonetheless, there is nothing in the rules to prevent the establishment of a business that does not reoffer the shares. Individuals or companies are regulation-free if they simply offer to buy private stock and hold it. That means bid-side market quotes might be advertised by an investor seeking a private stockholder who wanted to purchase a house, say, rather than admire a stack of official certificates. The investor would take in the shares for cash, and then hold them until the public market opened up via an initial offering, and the restricted period (if any) expired. The goal would be to hit big on enough positions to make the cumulative risk pay off. But having searched in vain for such a one-sided market-maker, it looks to INC. like the idea has not fired entrepreneurial zeal.

Still, setting up a business to speculate in the holdings of private-equity grantees can be done. And there might well be a handsome profit in it, judging by the enviable long-term firmness the initial public offering market has been displaying.