ASIC thinks 16 equity crowdfund platforms may be too many for Australia
The corporate regulator is hinting at consolidation or closures among the now-16 licensed platforms.
ASIC is “concerned” about whether the sector can support that many platforms, but noted that changes in September last year to allow private companies to raise money via the system was a potential source of growth.
“The number of CSF intermediaries is large when compared with the number of CSF offers and the actual amount of capital raised,” the regulator said in a report on the sector on Friday.
It also noted “there was greater participation in equity crowdfunded offers in the first year in New Zealand… than in Australia” but hoped the latter’s size and regulatory tweaks during the first 12 months will help push the sector forward into a second year.
By June 30, ASIC’s data shows Australia had seen 14 successful campaigns and 14 failed campaigns.
Equity crowdfunding was legalised in January 2018, allowing retail investors to put money into very early stage ventures or companies looking for amounts of cash that didn’t warrant going to more sophisticated lenders or investors.
The rounds are capped at $5m and individuals are allowed to invest up to $10,000 only.
In a report on the sector’s first five and a half months, ASIC said eight platforms raised $7.04m which it noted was not a large amount of money, given companies can raise up to $5m each.
ASIC said that based on their early data, equity crowdfunding was an expensive way for companies to raise funds, with fees averaging 7 per cent of the funds raised.
But only one platform — which it didn’t name — received any complaints, and that was due to the site slowing down during an exceptionally popular campaign.
Two of the 16 licensed platforms closed successful campaigns in the year to date, and two saw campaigns that failed.
Birchal has closed six successful deals and Equitise three. Equitise also saw a campaign by Bit Trade fail, and Enable Funding’s campaign for Zimpla failed.
Of Birchal’s six, four hit their maximum target: off-road car gear seller Chief Products, women-only rideshare Shebah, and two brewers Dainton Brewery and Black Hops Brewing.
These are the only four campaigns of the at-least 59 launched in Australia to date that have hit the maximum target, according to Stockhead data.
Birchal CEO Alan Crabbe told Stockhead last year it was one of their goals to get companies to hit their maximums.
“We’re saying there is too big a range between the minimum and the maximum and we’re trying to encourage companies to set their target being the maximum because if you can put away the maximum there’s demand [for a subsequent raise],” he said last year.
Stockhead data shows there have been at least 11 failed campaigns and 26 success stories since equity crowdfunding launched.
Three were withdrawn before the campaign closed.
Enable Funding’s campaign Propset pulled a campaign because investors perceived them to be a mortgage broker, and they struggled to raise interest following the banking Royal Commission recommended to halt broker commissions.
Equitise’s campaign Darren Handley Designs withdrew in order to hold talks with a sophisticated investor.
And Bilfolda’s campaign with resources explorer Greenfields Exploration was suspended with no reason given.
The most active platform is equity crowdfunding specialist Birchal which presented at least 40 investments to the market since January last year. At least 16 made it past the ‘expression of interest’ and ‘upcoming’ level to close a campaign.
Capital raising generalist site Equitise has presented at least 22 equity crowdfunds, two of which were by digital bank hopeful Xinja.
OnMarket counts eight, with Solar D trying again on this platform after being unsuccessful as Capital Labs’ single equity crowdfund.
Crowd88 and Enable Funding are the only other active platforms in Australia, offering eight past, current and upcoming campaigns between them.