B v A shares selling

In theory you can sell them based on the other comments but in reality it’s unlikely.

Crowdcube had planned on adding a secondary market, but have pushed those plans back or maybe even ditched them as I’ve not heard anything recently on this.

Seedrs on the other hand have a secondary market but that doesn’t mean you’ll be able to find a buyer.

Liquidity is a issue in crowd investing.

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Not daft at all :slight_smile:
I’m reading up too - thought I’d share what I know.

The Monzo forum has examples of people selling (transferring) through CC, just depends on the demand I guess

They’re very easy to transfer, very difficult to sell.

That is to say that if you have a willing buyer at a price you are happy with then great. We’ll process the transfer. Finding yourself a buyer is the challenge. Applicable tax on any sale also applies.

For future reference and to emphasise CC’s response: the company itself has to be involved in the transfer. If they / we aren’t aware it’s taken place and updated the relevant records accordingly it effectively hasn’t taken place (in law).

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Revolut originally raised on Crowdcube and then transferred over to Seedrs where the shares sell nearly instantly on the secondary market. People looking to buy are complaining in the Seedrs forums about it being too fast and so they can’t buy them! Freetrade might decide to change over to Seedrs in future which would mean you could sell earlier (but I’m sure that’s a complicated decision)…

That’s a great feature. Hopefully in the future Crowdcube will set up a secondary market for shares also.

I did a quick google and Crowdcube had their first secondary share sale on the platform :tada: Looks fairly different to Seedrs as the sale was to business angles.

Notice that most investors chose not to sell, even to realise a 9x return! Investing in a start up should be considered a long term investment, but regardless this looks promising if you do have a need to sell…

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Excellent article find :eyes:

Absolutely this goes without saying.

However, I think while traditional Angel Investors, Seed Investors, Venture Capitalists and Private Equity have no real prospect of experiencing a life changing liquidity shock, a single human Crowdfunder certainly could so any progress in curating some form of secondary market on Crowdfunding platforms is something we all probably see as a good thing for the layman investors.
Not only this, but it’ll probably have the effect of increasing the pool of willing Crowdfunders if they have peace of mind that IPO or big buyout isn’t their only realisable exit option.

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I hear you but you shouldn’t be investing money you could possibly need in a crowdfunded startup. Personally I’d treat any investment through crowdfunding as money gone.

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Perhaps you could undertake more analysis on the companies you invest into? Surely Crowdcube is high risk and extreme reward, and many startups to indeed approach an already competitive market. But rarely you see incredible people with great potential, filling the niche market with their product that is different and appealing to the customers.

Of course, whilst you never know who that is, the best you can do is following their news and updates for months/years and looking at the figures. And that will help you to make more informed decisions and deviate from your statement about money invested in Crowdcube is lost.

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Proper due diligence is really complicated in crowd investing, a lot of companies are precious about sharing details. Just have a look at some of the discussions on existing pitches on Crowdcube and Seedrs. And obviously there’s a lot out of the founders control in heavily regulated businesses like Freetrade…that’s why thinking about the money gone is the best way to avoid going overboard when investing.

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For sure, but there are unknown unknowns - say a Black Swan event - that may shock someone’s personal life in the future that one never reasonably even thought to account for e.g. premature funeral costs of a loved one, bankruptcy, unexpected legal costs, you name it.

Personally, I wouldn’t say it’s money gone because I’d have some expection of the ROI>0 otherwise I wouldn’t invest in the first place.

More only investing money one can “afford” to lose.

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Haha thanks for the patronising reply.

I am extremely happy with the results of my investing career thanks and could have retired in my 30s if I’d chosen to do so.

Professional VCs expect maybe 1 in 10 of their investments to come good. That’s with teams of experienced analysts poring over the books and getting to know the teams. Personally I’ve done the due diligence on company purchases from $20m to over $500m, and guided series A investment totalling maybe a hundred m into a few startups.

Series A and B investing is incredibly risky, with potentially high rewards. Putting up money you can’t afford to lose is positively stupid.

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I’ve had FTSE100 companies do this!

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I’m in agreement with everything you said.

However, my point was, while being prepared to lose all capital is a factor, in expectation this is not the case (simple probability using linear expectation operators). Our due diligence should determine that investing in FreeTrade is a positive NPV project otherwise we shouldn’t be investing at all.

Also, I’m not a risk-neutral investor but a risk-averse investor. Therefore, liquidity is of value to me. This is not to say that I need the liquidity, but that all things being equal I prefer a the scenario of crowdfunding with the option of secondary liquidity over the scenario of crowdfunding without the option of secondary liquidity.

Serious money would be relative, but I agree given my username is “Diversify” after all :smile: Shouldn’t put all our eggs in one basket!

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Would just like to echo what you guys are saying. In the olden days of the dot .com I invested in a few early stage companies , some did well and a couple went bust. Back then I hasn’t grasped the principle of spreading risk and over invested. When a couple of companies went bust I lost a considerable amount of capital. Took me 10 years to recover from that loss. So my advice is spread the risk and only invest what you can afford to loose.

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Lots of good advice - diversification is key whether it’s crowdfunding or in the stock market, a multi asset portfolio achieves this (and can be achieved solely through ETF’s).

I take great comfort when the shares are EIS eligible, if you’re a UK tax payer you’ll get tax relief for 30%, and loss relief at your marginal rate of tax (i.e. 20% or 40% for most people). That limits the total loss to a max 42%-56% (best to check before considering investing).

It’s all part of the learning experience!! It’ll make you a better investor!

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Hello guys, I am new here and I would like to ask you three questions:
What reasonable exit do you see when investing in Freetrade (waiting for IPO, BO or…)?
How much real control do we, as retail investors in a private company, have (I like how the Freetrade team is handling things, which is why I am considering investing, but after all they,having the full control, might decide to never IPO, sell, issue dividends or take questionable management decisions)?
I know private companies’ shares are not allowed into an ISA but how can we store securely our shares in an account, where we are able to follow pricing, data and history?
I would love to see a response from the Freetrade team, too.
Thank you!

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Hello Sam, great to have you here!

What reasonable exit do you see when investing in Freetrade (waiting for IPO, BO or…)?

It’s impossible to say at this point. The journey is long and uncertain, but the exciting thing is we’re all here at a very early stage. The pitch deck on Crowdcube will contain information about financial forecasts and expectations of growth. Executing on these is the focus, so that the exit options are flexible and attractive. As alluded to above, this is not guaranteed for any Crowdcube investment.

How much real control do we, as retail investors in a private company, have

The legalese answer is that only A Ordinary shareholders have voting rights, which for this round are awarded to investors of £20k [edited] or greater. B Investment shareholders do not have voting rights and therefore cannot exercise any control in this way. If any shareholder votes were to take place, a majority of 50% or 75% of A shareholders would need consensus for the motion to pass, depending on its content. This is all standard corporate governance stuff and, in my view, not something ‘smaller’ investors (including myself) should be too concerned with.

In terms of how can you influence the company and the product, regardless of your shareholding, step one is to join the community - which you’ve done. Use the product, give the team honest and constructive feedback. Educate friends on why they should be investing and how Freetrade facilitates it. This is what it means to be a retail crowdfunding investor!

private companies’ shares are not allowed into an ISA but how can we store securely our shares in an account

Unfortunately no ISA tax benefits, but make sure to utilise the EIS facility if you’re a UK tax payer. As for security, no need to worry. The company’s register of shares is the ‘source of truth’ and as long as you’re on it with contact details up to date there’s no custody issues and you don’t need a separate account. We’ll update you via Crowdcube and other methods from time to time.

where we are able to follow pricing, data and history

Companies House will always show the latest information on what we are legally required to disclose. In addition to this, future crowdfunding raises (if any) will have a pitch deck as I mentioned above, which will look forward but also backwards to update existing shareholders. Outside of corporate channels, transparency is a core part of our mission. There will be plenty of good data points to get your teeth into.

Hope that’s all clear - as we write more of these answers the community leadership (stellar job, guys) will be linking to previous answers when the same questions or similar are asked, so please don’t be disheartened if a Freetrade team member doesn’t always reply to you directly. We’re a small team (growing fast).

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Thank you for the extensive answer!

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