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Monday, 22 October 2018

Some Seedrs investors being offered 25% discount to buy shares before the public gets in.

It has been brought to our attention that Gartenzwerg Technologies is offering existing Seedrs SHs a 25% discount, linked to their preemption rights, if they buy in a new round, which will soon be available to the public at the full price. 

Gartenzwerg have stated (not to us as they didnt deem us important enough and didnt wish to give us publicity!) that the 25% discount mentioned here was always in the form sheet for the shares issued in the first round. These terms are not published at CH. We assume this claim is correct though as it has been made with Seedrs knowledge. So all seems to be fine. The shares issued as part of the pre emption are NOT being counted on the Seedrs new campaign - all shares issued in the new campign are at the full current price  - according to the CEO.  The new Seedrs pitch was kickstarted with a one off investment of £100k and recently the company issued shares to that value at a price of 80p - a conversion of some note we have to assume. But then that couldnt be in this round - could it?  27 Oct 18

The letter to existing SHs is very explicit. Existing SHs have preemption rights. So far so good. So for example if you had purchased £1000 of shares before, you would be entitled to buy another £1000 in this round - although strictly speaking that isnt what preemption rights are for. However in this new, currently private round, you will get a 25% discount on your £1000 worth of 'premeption rights' shares'; so will only pay £750. The implication is very clear that when the campaign goes public, people will have to pay the full £1000 for £1000 worth of shares. 

They have therefore created two prices for the same share in one round. We do not know whether the public were going to be told this or not. We assume not as it would be bound to cause a stir. 

We were under the impression that all shares in an ECF campaign had to be pari passu - ie they were all the same apart from varying degrees of rights - so same price (essential) and same standing in case of exit,collapse etc. But some might have attached rights to vote, preemption etc. This difference is then translated into A, B and C etc share denominations. But the crucial thing is the price for ALL differing classes is THE SAME. That is the offer price. We may be wrong. 

Of course what this does in terms of the mechanics of ECF, is push the 'already invested' indicator on Seedrs higher.  This in turn makes it more likely that when the pitch goes public, tomorrow, that indicator is sitting above the magic 30%. Which is all fine so long as everyone knows that these investments in Gartenzwerg Technologies have been given a 25% discount incentive. 

We just thought investors might like to know what is going on behind closed doors. 


  1. A few I know of offer a 'convertible', probably a 'loan note' a couple of months before the public round. All with a discount.
    See Brickowner, Hybrid Air Vehicles, Warwick Audio.

    1. Yes - Thanks. Those are legal and fine (ish!) but this is a straight equity offer according to their own email to SHs. There is no mention of a convertible which is a totally separate offer to allowing existing SHs to take up their PE rights.

  2. While looking at this company for purposes of investing when I was doing some DD this article came up


    Is it correct that there is dual pricing for this round where pre-emption shares have been given a 25% discount over those that are being sold to new shareholders ? If so I can't see that disclosed anywhere in the documents on the pitch ?

    Profile pictureTeam member
    Sabrina Palme, CEO at Gartenzwerg, 2 hours ago
    Hi Paul,
    Glad to hear you are interested in joining our community.

    This article doesn't reflect the full picture and I'm not sure where the author got the information from. The 25% discount was part of our termsheet in 2017 and was offered to investors who came onboard in that round to maintain their positions (not to increase) in the immediate next round as a benefit for supporting us when Gartenzwerg was just a concept. If they wish to increase their shareholding, they will pay the round price in this public campaign.

    Seedrs is working with us since last round to offer this preemption benefit limited to maintaining the position of our existing investors and everything is according to regulations. Preemption investments are not reflected in the main campaign to avoid misguiding investors.

    Further, at the end of our campaign page there is a disclosure mentioning this campaign is part of a larger up to £1M round.

    I hope this answers your question.

    Kind regards,
    Sabrina and Gartenzwerg team

    1. We were contacted by a SH whoch is whe we knew about the 25%. If its all legit then no worries but it did seem to us that the wording suggested this was a new plan.

  3. So is this a misrepresentation in the Seedrs forum ? Seems some stucky wicket being played if so