Monday, 4 July 2016

Fools rush in - Crowdcube's new £5m raise.

We have been saying for a while that Crowdcube must be short of cash.


When you are running a company that spends £6m and only brings in £2m , the results are obvious. 

Flying in the face of the obvious slowdown that the Brexit vote and its uncertainty will bring, Crowdcube seem to have pushed the big red panic button. They have announced a £5m raise on their own platform. You can enlist along with others keen to kiss goodbye to their money right now, with the event opening in two weeks. We wont have details for a couple of weeks, but it's fair to assume that only a fraction of the £5m will be crowdfunded - this is their normal ploy.

So what are people being asked to invest in? Crowdcube started in 2011, set up by two PR guys. Since then, it has helped to fund hundreds of businesses. But the returns have been almost zero and the losses are mounting  - into the tens of millions already. A variety of scandals have trickled out showing the platform to be fairly useless (that's us being nice) at its due diligence. There have also been and continue to be, a number of highly dubious pre pack administrations that have stemmed from the Crowdcube raise and it cant be long before the FCA has to take some action. As to their projections, well if they are as ridiculous as the ones for their last raise, then we can all at least have a good laugh. 

Crowdcube has built up a powerful and very expensive PR machine. To get close to reaching a profit the number of completed pitches has to increase 3 fold - this at a time when most people will be holding back on this type of investment waiting for a more certain outlook.

You would have to certifiable to invest in this company now.

Although there is another possibility. Let's assume Crowdcube are not as stupid as we think they are. They must know that to fail to raise this money on their own platform would be suicidal. So they must have this £5m underwritten by their backers. Time will tell.    

3 comments:

  1. Where did get those £5m from? All I can see is that they want to issue an official prospectus so that they can raise MORE than 5m EUR from the crowd. Also if an institutional investor would take the chunk of the raise as you expect they wouldn't need the prospectus (compare with their series A in 2014). If that's the case I see this rather as a negative, because that would me the valuation is too lofty for the 'professionals'.

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    1. £5m was reported in Businesss Insider article. they will for sure have a large chunk of this (if not all of it) already placed with larger investors...that's the way they work. That is what they have done every time so far.

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  2. Please someone post the Crowdcube Offer Document here !

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