Seedrs Secondary Market provides an opportunity to offer investors in your business a chance to realise a return far earlier than traditionally possible by letting them sell their shares to other Seedrs users.
As Seedrs is the shareholder in your company, as opposed to the underlying investor on the campaign (because of our nominee structure), they can sell their shares without causing any burden to the business at all. Seedrs provides the platform for them to list the shares, the documentation to sell and transfer beneficiary ownership to a new recipient, and a secure payment system.
How does this affect my business?
In short, it doesn't, there is nothing for you to do to facilitate this, or any admin once it has happened, it is all handled by Seedrs.
The only element that might be affected over time is the number of investors in your business being managed by the Seedrs nominee. An investor could buy the shares of a fellow investor in your business, or they could sell their shares to 2 or more new investors. As a result the exact number of investors would fluctuate over time, although it's unlikely that it will alter that drastically from what we have seen.
Who can buy shares in my business on the Secondary Market?
Any user of Seedrs, whether they have previously invested in a business or not, can purchase shares on the Secondary market. Demand, however, is limited by supply. If no one is looking to sell the shares in your business then, obviously, no one can buy them.
Is there a fee to list my business on the Secondary Market?
No, there are no fees for the business to have their shares listed or when sales occur.
There are also no transaction fees for either buyers or sellers on the Secondary Market.
Aligning with our success fee for entrepreneurs, the only fees we charge are to an investor when they sell for a profit (sell price > initial buy price = profit). In that case 7.5% will be charged on the profit. For example:
- If you buy at £100 and sell at £100 you pay £0
- If you buy at £100 and sell at £90 you pay £0
- If you buy at £100 and sell at £200 you pay £7.5 (7.5% of £100 profit).
How are the shares of my business priced?
We calculate the fair value of the shares by looking at two share prices: the share price at which the investor invested; and the most up-to-date fair value of the shares (which we calculate when we obtain relevant information about the company in question).
To determine fair value, we have developed and followed a comprehensive Valuation Policy following the industry-standard International Private Equity and Venture Capital Valuation (IPEV) Guidelines. In brief, that policy provides as follows:
- Where the company has raised a further round of equity capital within the last three years, and (1) the capital was raised for shares of the same class of shares as, or a class of shares substantially the same as, the class held by Seedrs investors, and (2) the company is continuing or preparing to trade, we have valued the shares at the value of the most recent fundraising round.
- Where the company has not raised additional capital for the same or substantially the same class of shares since its Seedrs round, but (1) the Seedrs round closed within the last three years, and (2) the company continuing or preparing to trade, we have valued the shares at the value of the Seedrs round.
- Where the company has not raised capital for the same or substantially the same class of shares over three years, through Seedrs or other means, but is it is continuing or preparing to trade, we have conducted a substantive valuation analysis with a presumption of decline in value. Note that this is the only situation where, in theory, we could mark the fair value of an investment as worth more than the share price in its latest round of finance, but we would only do so based on recognised financial metrics. None of the deals covered by this report have been marked up on this basis.
- Where the company has wound up, indicated its intention to wind up or ceased (or taken measures to cease) trading or preparing to trade, we have valued the shares at zero.
Ernst & Young LLP (EY) has reviewed these processes and procedures and consider that they are in line with the IPEV Guidelines.
What if I don't want to allow investors through Seedrs to sell their shares?
You are able to opt out of the Secondary market when you are setting up your campaign to raise from investors. We indicate on each campaign whether that business will be opting in to the Secondary market. As a word of caution, we know that the secondary market is a big bonus for an investor, and it has become the norm for a business to be on the secondary market. As a result it will likely make your campaign less attractive for Seedrs users.
Is there anything that would mean my businesses shares aren't eligible for trading?
Yes, if there is an imminent event that would mean a change in price of share it is likely we would make your shares ineligible for trading. Examples of this type of event would be a new fundraising round at an increased valuation, winding up or dissolution of the company.
You are required to update Seedrs of these eventualities in the normal course of reporting to us as a shareholder so there is nothing extra you need to do. The act of marking your businesses shares as ineligible for trading is the responsibility of Seedrs and we will do this as soon as you inform us of one such event.