PledgeMe and Snowball Effect get first equity crowd funding licences
PledgeMe and Snowball Effect are the first equity crowd funders to be licensed to act as intermediaries between companies wanting to sell shares and investors wanting to buy.
This morning, the Financial Markets Authority issued its first licenses under the Financial Markets Conduct Act 2013 for equity crowd funding – an alternative to listing on the stock exchange and a cheap way for entrepreneurs to raise funds from the public.
Companies are limited to raising no more than $2 million from the public in any 12-month period.
12 companies put forward expressions of interest. The FMA put five applications under formal consideration.
The licensing of these two providers means a more open and innovative market for companies and investors, FMA director of compliance Elaine Campbell said in a statement.
“However, it’s important to remember that companies issuing securities through crowd funding services require less disclosure than companies listed on the registered exchange, NZX.
“Typically, these companies will be at a much earlier stage in their existence than listed companies, so their financial track record and business prospects will be much less clear.”
Snowball Effect will launch its services in the week of August 11, offering investors shareholding stakes in craft brewery Renaissance Brewing.
Renaissance Brewing is looking for $600,000-$700,000 in new funding to expand its Marlborough operations and try to break into the international market.
It is offering 300,000-350,000 shares (minimum purchase 250 shares) at $2, valuing the company at $5 million and representing 12.28% equity if fully subscribed, according to Snowball. The initial offer period is for 30 days.
Equity crowd funding is already proving popular with fledgling companies looking for a leg-up.
More than 200 companies have contacted Snowball about raising capital and the team is actively working with 14 businesses to bring them to market in the coming months, Snowball co-founder Simeon Burnett said in a statement.
The company hopes to open up the high-growth small and medium sized business sector to investors, without brokerage fees.
Internationally, equity crowd funding is recognised for opening up new opportunities for smaller businesses to raise capital for growth. It is also a way to offer a more innovative form of investment to the public.
While the FMA will monitor the newly regulated equity crowd-funding environment, investors should remember to “do their homework” as these are higher-risk investments, Ms Campbell said.
Companies listed with PledgeMe and Snowball do not have to provide a product disclosure statement, but the crowd funders are required to provide information about its service and the risks of investing through the service to investors.
PledgeMe co-founder and chief executive Anna Guenther said it is New Zealand’s biggest project crowdfunding platform, and has raised $2.5 million to fund 640 projects in the past two years.
PledgeMe has been working with a number of companies ready to start equity crowdfunding and will launch their campaigns on August 15, she said.