Thursday, 5 October 2017

Muted applause greets Wealthify sale to Aviva


Wealthify raised £1.1m on Seedrs a year ago. Now they have sold a majority share to Aviva. Seedrs investors have no choice but to sell out, it's part of the deal the founders made. Is this really what equity crowdfunding is about?

So in 12 months, Seedrs investors will see a return of 18.74% gross profit on their money. They will lose their EIS from last year's tax return. You also have to figure in the Seedrs Carry Fee, which they take off any profits before handing them out. This fee is 7.5% of the profit - you can do the math.

Well done to the founders of Wealthify first off. Opportunity knocked and you grabbed it.

However to start your SH letter by claiming that your SHs are 'valued' is clearly nonsense. They had no say in this decision. The company may now go on to become very successful but the people who risked their necks for you, have been fobbed off with a 12 month return of under 20%. They were merely human stepping stones used for your own purposes.

Im pretty sure that if that had been on offer but obviously not guaranteed, a year ago you would have failed to raise anything. After you have allowed for the lost opportunity cost and the hassle of the EIS cancellation, is this such a great deal?

Founders and maybe a few others will maintain their holdings and get the full benefit of this down the line if it all goes well.

It is yet another example of the fact that even when things go well for an ECF funded company, shareholders will be lucky to see much by way of a return. In this instance, why were Seedrs shareholders not better protected?

4 comments:

  1. Basically the investors were treated like a bridging loan and had the house fallen down then it would have been on our heads...

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  2. What are you proposing? That shareholder agreements should not include "drag-along" clauses that force minority shareholders to sell at the same terms as everyone else in the case of an exit?

    That would be a terrible idea.

    If minority shareholders, ECF or not, were not compelled by the agreement to sell via a drag along clause, an exit would be very difficult to achieve.

    If Joe Bloggs from Norwich has to be asked permission, who owns £50 of shares, refuses to sell his share, then aviva will not be able to acquire 100% of the company. Angel investors are subject to these clauses as well, it's normal, it would be impossible to do it any other way sensibly. It would lead to a worse outcome for all if each tiny shareholder had a right of refusal.

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  3. A very poor call by both the company and Seedrs......

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  4. Very poor from Seedrs. Can't be too mad at Wealthify as they just want a return.

    However, Seedrs are there to protect investors!

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