Unlisted companies are lining up to access crowd-sourced funding, says operator
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Unlisted companies are lining up to access crowd-sourced funding when it becomes widely available next week, according to one operator of the new scheme.
From September 29, public companies with less than $25 million revenue can apply for up to $5 million a year directly to investors, bypassing the ASX and other fund-raising channels.
“We have been overwhelmed with the level of interest, and many have been willing to convert to a public company because they feel that they will be growing quite quickly anyway,” says Matt Vitale, co-founder of crowd-funding platform Birchal.com.
The new scheme was safer for investors than investing in ASX stocks because of a $10,000 investment cap per company and a cooling off period, Mr Vitale said.
“A retiree could put their life savings in a speculative mining stock, Mr Vitale said.
“Like any investment there are benefits and risks of the offer that need to be considered but there are several [crowdfunding] safeguards for retail investors that are larger than those for the ASX.”
This week the corporate regulator ASIC introduced a templated crowd-funding offer document for companies wanting to use the scheme.
The 17-page document, which details statutory requirements and explains the process of using funds, is an acknowledgment that many companies accessing the scheme will have little experience in public share offers.
However ASIC commissioner John Price said the regime will open up new opportunities for smaller companies.
“Crowd-sourcing funding provides an opportunity for small to medium-sized business to access an alternate source of capital without the regulatory burden of traditional fundraising,” Mr Price said.
“New guidance will help public companies and crowd-funding platform operators comply with their obligations under the CSF regime, while supporting investor confidence.”
An explicit warning of risk warns retail investors that “investment in these types of ventures is speculative and carries high risk”.