Equity crowdfunding platform Seedrs has launched a secondary market.
A beta version will be launched in the summer.
Now investors have the opportunity to sell shares of companies they invested in through Seedrs, thereby realising early returns. Conversely, investors who want to add to their position in a Seedrs company will be able to buy shares through this market.
A spokesman for Seedrs says this is a pioneering move within the industry and one which continues the process of democratising early-stage investment, begun by the equity crowdfunding sector some five years ago. It also says that it decided to launch its secondary market after seeing strong demand from its investor base.
The secondary market aims to alleviate the problem of investors who have bought shares in Seedrs companies and then having to wait for an exit event, such as an IPO, or a sale of the business. The new market will allow investors the opportunity to sell shares in companies they have invested in via Seedrs to other investors. Meanwhile, investors in Seedrs-funded companies will have the opportunity to increase their stakes.
The caveat is of course, as in any market, the ability to buy, or sell, will depend on there being sufficient supply, or demand.
Seedrs told GBI Magazine that when the beta programme begins, a number of market rules will be in force:
- it will be open for trading for a one-week window every month. The window will start on the first Tuesday of each month, which Seedrs calls “Trading Tuesdays”;
- shares will trade only at “fair value”, which is the price that Seedrs marks them pursuant to its Valuation Policy (accounting firm EY has confirmed that the Seedrs Valuation Policy is consistent with the industry-standard International Private Equity and Venture Capital Valuation Guidelines);
- only current investors in a given company will be allowed to buy shares in it;
- some companies will be ineligible for trading at certain times. This will generally be the case where the company is in the process of a major corporate transaction, or other extraordinary circumstances are in place.
CEO and co-founder of Seedrs Jeff Lynn said: “We have listened to our huge investor base, who have increasingly been showing a desire for a mechanism to buy and sell shares in our portfolio companies.
“The potential opportunities that a secondary market brings for buyers, sellers and entrepreneurs alike makes this development incredibly exciting. Perhaps most importantly, we believe this will help businesses who are raising capital through Seedrs: with the prospect of secondary sales now available, we expect more investors are likely to want to back the great businesses we work with.
“Secondary markets are challenging to operate successfully, and we are very conscious of our obligation to provide our investors the best experience we can. That is why we are launching this product in beta form initially, so that we can observe behaviour and make improvements as we go.”