"Micro" equity investments | P2P Independent Forum

tjvest
New Member

Posts: 1

"Micro" equity investments Mar 27, 2017 12:24:24 GMT

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Post by tjvest on Mar 27, 2017 12:24:24 GMT

Hi, my question is how much do fees and commission eat into small investments?

I've been a p2b lender through funding circle for the best part of 5 years and am now looking into equity crowdfunding. I believe a good initial approach will be to start by investing small amounts in many start ups and taking advantage of the generous EIS/SEIS tax refunds.

An early concern for doing this is fees and commission

For example, "Seedrs" highlights potential £30+ commission to sell publicly listed shares. If this occurs on a £10 investment, even if it goes up by x10 to £100 it's a 1/3rd of your profits. This suggests to me that small investments are not feasible.

Is this the case? Are there other exit types in which you only pay fees relative to your investment/ profit? (I guess this highlights that I don't fully understand the potential "exit" routes)

Thanks in advance for your thoughts.

Last Edit: Mar 27, 2017 12:25:28 GMT by tjvest: spelling

bigfoot12
Member of DD Central

Posts: 1,817
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"Micro" equity investments Mar 27, 2017 12:57:35 GMT

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Post by bigfoot12 on Mar 27, 2017 12:57:35 GMT

My only experience has been a trade sale for cash, so you would have been okay in that case. I think that trade sales can be for equity so not that good for a very small holding.

A bigger issue might be total amount of paperwork. You will get an EIS certificate for each investment round you invest in, and you need to copy some details from each of these onto your tax return. I would not want to have to reclaim £300 of tax by copying the details of 100 certificates.

There are also updates and further funding rounds to read about. This is more time consuming per investment than P2P.

If you are interested in leaning more then 5-20 £10 investments may be a good idea to get an insider's view of the mistakes that companies and investors make, but as you notice it isn't likely to make you rich.

catalist

Posts: 27

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"Micro" equity investments Apr 13, 2017 7:31:55 GMT

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Post by catalist on Apr 13, 2017 7:31:55 GMT

Hi,

In majority of cases, the investor does not have to pay any fees (at least in traditional form).

The only deductable expenses from your investment or profit might be the applicable taxes and share of profit to the platform in case of distribution.

As regards to selling your 10GBP investment on secondary market, I do not think it is very practical. I.e., Seedrs and Crowdcube do not have organized secondary markets, thus selling your shares is an administrative burden for the platform. But in any case, I believe that equity crowdfunding is not yet at the stage when you have to calculate the IRR of your investment (there are not diversification possibilities anyway) and if you are risk averse, this one should be avoided. This is not a traditional, fully diversifiable investment and you should perceive equity crowdfunding as hoping to invest in the next ''Facebook'' and be lucky, rather than calculating your IRR on paper and deducting fees.

Catalist