Back in September 2014, UK equity crowdfunding firm, Seedrs, made headlines when winemaker Chapel Down Group launched a crowdfunding campaign on the Seedrs platform. With shares trading on the ISDX, Chapel Down Group became the first public company to sell additional ownership in the firm via crowdfunding.
Taking it a step further, another winemaker, French Domaine Chanzy, is using Seedrs in conjunction with its planned initial public offering (IPO) on the London Stock Exchange’s AIM marketplace. Applying to the AIM and set to go public in March, £1.9 million of shares are being made available for sale currently on Seedrs. Shares are also being sold through a placing with several London based corporate finance firms. Overall, the £1.9 million in shares will be sold on a first come basis between both Seedrs and and institutional investors.
Following the sale of the allotment, shares will begin to trade publicly on the AIM. Buyers of Domaine Chanzy shares will then be able to sell their stakes directly on the exchange with the broker of their choice after providing ownership. Per a sale price of 120p per share, Domaine Chanzy expects a market capitalization of around £9.66 million. Similar to Chapel Down, Domaine Chanzy will also be providing incentives such as discounts on their wines to Seedrs investors.
Representing Seedrs during our Fintech Panel in last November’s Forex Magnates London Summit, Ben Sears, the firms Director of Investors and Business Development answered questions about the Chapel Down Group sale. At the time, Sears explained that after successfully selling £3.9 million in three weeks, they had several other publicly listed firms contact them about information for potential crowdfunding campaigns. When explaining Chapel Down’s success, Ben Sears stated that they did a great job of marketing the crowdfunding campaign to their customers, which may not work well for all products.
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The IPO marks just the second time a firm is going public in combination with raising funds with a crowdfunding platform, following Mill Residential RIET which did so in December 2014 using SyndicateRoom. The success of such IPO’s could be a boon for the overall crowdfunding sector as it merges with traditional investment banking.
The more efficient such sales become, it raises the chances that other firms use crowdfunding to increase exposure of their company and widen the net of potential buyers of their shares as they seek an IPO. A combination of crowdfunding with traditional investment banking could also help in the price discovery process, where shares can be made available with staggered prices depending on demand, to allow a company to maximize the funds that they raise when going public. Echoing thoughts from Ben Sears from the abovementioned Fintech Panel, firms with vibrant communities who could be counted on to become investors, could also potentially see value in crowdfunding as it provides a method for them to increase engagement with the users.
Domaine Chanzy’s IPO also provides an immediate solution to one of the biggest deficiencies in equity crowdfunding; lack of an active secondary market for buyers to sell shares.
(Full prospectus available here)
(Correction – a previous version of this post incorrectly attributed the IPO as the first such for the crowdfunding sector when in fact a similar transaction was completed using SyndicateRoom in December 2014. The two firms do differ in that Seedrs is open to smaller investment amounts and SyndicateRoom has lead investors who often have ongoing involvement with the firm raising funds or an expertise in the sector)