[âŚ] Zing Zing said that âhaving grown from two sites to fourâ it was ânow raising funds for further expansionâ.
The investor said Zing Zingâs business plan led him to believe the investment was to be used to open new sites. When this did not happen, he complained that the pitch was misleading.
I am all for greater DD by the platforms! However, I am surprised CrowdCube lost this case as âraising funds for further expansionâ doesnât sound like it necessarily refers to new sites per se, even in the same sentence as âhaving grown from two sites to fourâ. Moreover, the statement refers to the future, which any investor should understand is subject to uncertainty. Strong directors and managers can change plans as the business environment changes- itâs just a thing and can be essential for the companyâs survival.
The decision implies a duty on platforms to conduct plausibility tests on forward-looking statements made by fundraisers âŚ
Iâd much rather platforms focus efforts on verifying facts and material information related to the present and recent past. Stuff like:
Claims that defy GCSE physics
Recent sale of equity/investments at wayyyy lower valuations
Missing historic financials
No competitor analysis or misstatement of competitor costs/disadvantages
Directors with multiple undisclosed past bankruptcies
I hadnât realised somebody above had already posted the ombudsmanâs findings:
Itâs interesting, basically CC didnât act in their customerâs interest because they only checked the pitch and not restricted documents. The restricted documents are external and thus CC claim they are exempt from their duties to the customers. However, itâs not hard to check the restricted documents so itâs reasonable to expect some DD on these.
In this particular case the restricted documents did state that half of the raise was for new sites leading the investor to believe that âexpansionâ in the pitch meant new sites. The investor wanted a buy out when this was apparently not the case.
So I do agree with you that investors should accept that directors can change direction and companies fail; particularly startups.
But I didnât, naively, realise CC didnât do DD on restricted documents. So whilst Iâve invested in CC I am on the side of ombudsman in this case and maybe more. Iâd prefer CC to survive as it helps retail investors back some great companies (FT, Revolut, some ethical companies, and some local companies, etc), and allows use to get in at an early stage, itâs still not a level playing field with VCs because we apparently canât do proper DD or get into the boardrooms. Thankfully, some raises are very involved with the founders answering questions and doing online AMA which is encouraging.
I donât think this is naivety. Weâve become accustomed to financial companies having to consider our best interests. Hiding behind the âwe only check some of their documentsâ was never going to pass the ombudsmanâs criteria for looking after the investors best interest.
ltâll be interesting to see how many of the investors will be pursuing a refund, ÂŁ13m might be more than CC could afford and then every other crowd funding failure on CC could be up for a ruling.
It looks like they hadnât filed their accounts so had a compulsory strike filed and removed. Iâm a fair way from an expert but isnât doesnât seem like a good thing.
They sent out an update this week and it seemed mostly positive.
Q1 2021 saw growth of 40% compared to the same period in 2020, particularly exciting as the pandemicâs effects were not fully felt until Q2 2020. We are currently 15% ahead of 2021 Targets and on track to hit our 2021 revenue target.
Well spotted, although their financials were filed late (21 Dec 2020 instead of 30 Sep 20 I believe), but long before the first gazette notice for compulsory strike (18 May 2021), so canât beleive that would be the reason for it. Might have been to do with their confirmation statement being late, but that too was filed before the first gazette notice (13 May 2021).
The compulsory strike was also discontinued the very next day (19 May 2021) citing âcause has been shown why the company should not be struck off the registerâ and it references the date of the confirmation statement filing, 13 May 2021. Sounds like an error from the registrar to me.
I am not an investor in either MD or GI but I would have thought they were doing ok. Do you mind sharing your thoughts on them?
A lesson I learnt from Den (smart switch) was to be weary of companies that keep coming back for more funds year after year without institutional backing. Having institutions on board doesnât necessary mean itâs all smooth riding but it does reduce some risks to a degree. I notice a lot of companies market crowdfund as pre-institutional funding but never materialise⌠false promise⌠Den was such case
Just went onto the forum and saw that the founder sold ÂŁ2m worth of shares in the Seedrs secondary market⌠thatâs impressive⌠surprised that there is that level of liquidity for the shares in the secondary!
The most negative thread Iâve seenđ. Itâs fine if itâs as a cautionary tale to let people know the risk of investing /highlight undesclosed worries in companies that are crowdfunding. However, to dog on companies seems a waste of energy
The mattress company? Just seen a Google advert for them saying they have sold 500 units, when you click through it says 500,000. They are either understating their success, or bad with numbers
BidVine who raised via Seedrs including a sizeable VC investment announced they have gone into administration and have already sold off the IP. No public finance comms or details of the administratorsâŚ.just goodbye, weâre done.
