Assetz equity raise?

About a year ago, The House Crowd did something similar.  They were needing some money to expand.  They apparently turned down an offer from a business 'angel' and sold shares to some of their investors instead.  Whether it was a good investment for those people won't really be known until THC has its own IPO or gets bought out privately, but I must say they seem to have a much-increased deal flow this year, and they seem to be funding them very quickly.

The offer they made to their customers was (they claim - I have no reason to doubt) the same as the business angel had offered. They preferred to use their own investors which makes sense. It wasn't a very large amount (from memory) and it filled quickly. I thought the valuation looked high, but then growth since then has been very strong.

I would (normally) share pikestaff's views on these equity raises. But being invested on a platform for a reasonable period of time (& hearing about their future plans etc on the forum) helps me feel I’m at least as (if not more) likely to have a chance at guessing their prospects compared to another equity investment where press & analyst commentary (for what it’s worth) is basically all I have to go on..

So I’m interested. Never had a problem with throwing good money after more good money

They wanted to raise about £150k, and were willing to sell 5% of the company for that.  They offered about 50 shares at £3k each.  They had intended to keep the offer open until a certain date and then scale back applications if it was oversubscribed.  There was so much enthusiasm that the scaling back was going to limit all applicants to just one share, so they decided to close the offer early as soon as they had received as many applications as they had shares to offer.

They're doing something that not many -- any? -- others are doing, so they have less competition and they provide a diversification opportunity.  They're doing something that's reasonably easy to understand -- buying rundown properties very inexpensively, doing them up, and renting them out.  Most of what they do is equity-based rather than lending, so there's capital gain potential.  Unlike other crowdfunding equity platforms investing in start-ups where investments could either turn into big wins if the business is successful or big losses if it isn't, there's no gearing at THC so the likelihood of a total disaster should be quite small, and the rental income ought to be enough to support a dividend of around 6% p.a. during the holding period of 5+ years.  Sometime in the past year THC reduced their share of any profits from 50% to 25% (affecting projects started after the change), so that probably made them more attractive than they had been. 

One thing they do that bothers me is the way they project possible profits.  I don't have a problem with their assumption in most cases of a 5% p.a. increase in property prices, but IMHO they should be including more costs in their projections -- for maintenance expenses during the rental period and agents/conveyancing fees when they sell.  They cover themselves by saying "Returns quoted exclude repairs, agents’ fees, maintenance, wear and tear, void periods and deductions for preparation/filing of annual company accounts and company return (c. £300), etc." but I'd much rather they included estimates for those costs and produced returns that might be achievable.  They also refer to a gross return of, say, 85% over a 5-year project as being 17%/yr, which conveniently forgets about the power of compounding.  (It would take only a 13.1% p.a. return compounded over five years to produce an 85% increase, though I don't think the annual rate difference would be as high as 4% in reality because of the dividends paid during the course of the project.)

I haven't a clue what proportion of potential THC investors look at the projected returns, think that's what they're likely to achieve, and compare those to the rates quoted by AC and others.  I certainly don't, but I suspect this might result in a goodly number of disappointed THC investors five years from now.  On the other hand, I still think the projects are worth investing in, so their investors might be happy with the results at the end of the day.

to all the prior OPs: any reason this thread couldn't be on the main board ?

There's another "report" bit.ly/1CWttPb about flotations of p2x companies.

It's produced by one of the directors of Archover, who are of course, far from breaking the mould, being located in the Lloyds building and who take an insurance policy out on each of their borrowers (so let's run a poll on how likely they are to pay up if called upon).  I think that makes it clear that Archover are very keen on flotation.