The importance of secondary market as an innovation in the equity crowdfunding market relies on the fact that it promises to solve one of the biggest issues of the sector: liquity.
As the Financial Times pointed out,
The absence of a secondary market has been one of the major downsides to equity crowdfunding to date, with investors being required to hold their shares in a start-up until it lists on the stock market or is bought out.
How did that go? According to AltFi.com, the company said that some of its investors have realised up to 19x returns by selling their shares.
138 share lots from 80 different businesses were listed during the platform’s first trading window. Of these, 57 share lots from 40 different businesses have been sold. The share prices that are attached to these lots are determined by Seedrs, using its own valuation methodology. Accountancy firm EY has previously vouched for this methodology as being consistent with International Private Equity and Venture Capital (IPEV) Guidelines.
Examples of investors profiting during the platform’s premiere trading window include a 9.5x return for one investor, increasing to 19x when factoring in SEIS relief, and a 7.5x return for another, increasing to 15x with SEIS. These returns equated to profits of £600 and £643 respectively. The original investments were made in 2013 and 2012 respectively, meaning that both remain eligible for SEIS relief.
There have been more than 275 requests to sell shares in the next trading window, which will open in early July.
Find out more here.