The word is that investors in E-Car Club received 3X, when the recent purchase of a majority stake was agreed with Europcar Lab.
This is of course speculation as the real figures have not been confirmed and it is as described by Crowdcube, a multiple return and their first. Very few investors will make any real money though - only 4 took A shares and invested £15k - so a tidy £30k will be a great return over 2 years. A few more invested over £5k and likewise this will see a healthy return but those at the bottom end, about half the of the 63 including both Westlake and Lang, will only make enough to buy a new gadget.
Based on this example of what Crowdcube can produce for investors how does the Crowdcube advice of spreading the risk amongst 10 investments work out. Clearly if you have one in three making this return you would be roughly BE. However this seems very unlikely. To date we believe that investors have lost more than £3m with Crowdcube punts, so this return of £300k is a drop in the ocean.
A question which is at present unanswered is just why the 63 Crowd investors agreed to sell their shares at the rumoured 3X? With the aid of Europcar, we feel pretty sure that the value of E-Car Club would be far greater than the deal's suggested £1.5m in a very short time. E-Car Club had struggled to get open in London and the South East - their stated aim and clearly the most lucrative market. You could claim they had lost focus with deals like the recent one in St Andrews - where the hub is a good 30 minute walk from anywhere, on university grounds that are empty of students for large parts of the year. In one move Europcar solves this problem and opens up the whole European market.
Institutional investors have always said that having large numbers of tiny investors would put put people off doing deals with crowdfunded businesses. Crowdcube have always claimed the opposite. Is this evidence that the former opinion is correct? Could the Crowd investors have been offered this deal or no deal ie take a good 3X return now or take pretty well nothing later as E-Car Club either closes and is reborn or just closes. Certainly B shareholders would have had little choice - especially as the company had a drag along clause in its articles which would have forced all B holders to follow the a holders decision.
We may know more in October when they file their latest A01.
You should be delighted the buyout happened after just two years, so investors will have to return their EIS tax benefit (unless some of them hold on to their shares for another year or so and that's why Europcar 'only' bought a majority).
ReplyDeleteYour criticism that only those who put a lot of money at risk now get a decent profit is quite amusing. Did you expect crowdfunding to be like a lottery, where you can become millionaire for just 10 pound?
Firstly E-Car Club was not an SEIS or EIS investment and the point about a drag along clause is that they have no choice to 'hold on to their shares' as you put it. Secondly the point about the drag along clause was more to do with the false idea promoted by Crowdcube that small investors have any control over their investment. But thanks for the comment.
DeleteHi, I'm finding your site very interesting.... however, I do think you seem to overplay the near-absence of exits by successfully funded CC companies. With most of the companies benefiting from EIS or SEIS status, any of the CC companies that have raised funds would be doing their investors a disservice if they exited within the 3/5 year period. How many CC-funded companies actually raised funds before July 2012 (in the case of EIS status) or July 2010 (in the case of SEIS)? To me it doesn't seem surprising to expect them to start coming through over the next year or two.
ReplyDeleteYes that's a fair comment. However if you read 95% of the plans that have appeared on CC, they all ignore the 3 and 5 years rule claiming exits at multiples upto 12 in 3-4 years.
DeleteOur research is thorough and is based on the simple fact that only one of the businesses that has raised money on CC and have reported financial results, has managed to get anywhere close to its projections. Most have missed them by many miles and have either closed or had to refund or put progress on hold.
With the standard drag along clause that CC use, do you really think founders offered a 5-8X exit 4 years out with a option to remain as dircetors would be bothered by B shareholders losing their SEIS? Somehow we doubt that but we'd be happy to be wrong.
Why 5 years? Holding period is 3 years for both EIS and SEIS if I'm not mistaken?
DeleteI was just going by the dates given by anon above. Does it really matter?
DeleteIf you're an investor an the exit happens after 3 or 4 years then I'd say it does matter.
DeleteIt matters that as an investor you have to sell because of the drag along clause but do you really think companies are going to give up the offer of a buyout to please crowd investors tax schemes? The example of Ecar Club shows very clearly they will do whatever suits them best, not shareholders. Selling at 3X when the comany has just hooked up with one of the biggest operators in Europe is not a choice any sane person would make if they were given the choice. Our guess is that Ecar Club needed the hook up and Europcar were unwilling to allow a whole load of tniy investors to remain on board.
DeleteIf I was offered a 5-8x return, or even a 3x return before the 3 year period qualifying for tax relief I'd happily go without the tax relief!
Delete