If the business you invest in through Equity Crowdfunding makes an ‘exit’ at a higher value than what was initially invested, investors will receive a positive return on their investment. An exit can be in the form of:
Initial Public Offering (IPO) – The business grows to a point where it decides to list on the stock market. Once the company is listed, investors will be able to sell their shares on the stock market.
Trade sale – Another company decides to buy out the business. Investors will be paid for their stake at the purchase price.
Share buyback – Company management decides to buy back equity (shares) from its investors (this would require shareholder approval, and a selective buy-back would require a special resolution usually 75% of shareholders in the class affected).
When investor funding enables a business to reach profitability, and its growth is no longer constrained by financing, a company may begin to pay dividends to investors.
Equity Crowdfunding investments are speculative and carry high risk. You should be aware that some of your investments may return less than what you invested or nothing at all. In some cases, the business may be shut down or be sold for a nominal price. OnMarket will work closely with these businesses to ensure that any proceeds from a sale are distributed to investors.
Stay in the loop with your investments by keeping track of company announcements and updates after your investment has been made. Companies always appreciate feedback and input from shareholders, so if you believe you can add value to the companies you have invested in, feel free to reach out to them.