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ATA PLUS is glad to host a list of issuers, its businesses and potential investors on the ECF Platform. We are passionate about financial inclusion as well as matching lucrative businesses with investors to bring about positive social and economic outcomes. However, it is important for users to understand the characteristics and the workings of an equity crowdfunding marketplace.
The following are key characteristics that define ECF:
- Issuers using ATA PLUS' ECF Platform include start-ups, early stage and growth stage businesses. Investment in these types of businesses carries a considerable level of risk.
- As with all other investments, there is a risk that your investment may not materialize in a profit or you may lose your entire investment amount. You must be in a position to bear this risk without undue hardship.
- The law as stipulated under the Security Commission's regulation on equity crowdfunding requires people who offer financial products to give basic corporate and financial information to investors before they invest.
- However, kindly note that not all information of the Issuer is required to be disclosed or made available on the Platform.
- As such, there may be particular information which you as an investor may not be able to obtain through the Platform. It is therefore essential for investors to utilize their rights prior to committing to invest by asking questions, reading all information given carefully, and seeking independent professional advice if necessary.
Risks involved in investing in early-stage as well as growing businesses can be listed as follows :
Uncertainty of returns : Depending on the shareholders’ agreement (which differs from business to business), certain companies may opt not to pay dividends, therefore depriving investors of early and short-term returns. Businesses often reinvest what they earn in the growth or survival of the business, which may be the priority for both business owners and shareholders.
Lack of liquidity : There is no guarantee that an investor will be able to sell their shares when they want to and to whom. Currently, there is no recognized secondary market for trading shares in companies funded by equity crowdfunding. (Please read more on ‘exit strategy’ in our FAQ section).
Dilution : The same company that reaches its funding target may need more funding to grow or survive at a later stage. It is possible that the company may issue more shares, thus decreasing the value of the shares as offered previously on listing.
Material events : Start-up and growing businesses often have highly specialized and focused offerings. This may lead to vulnerability of the business to internal and external threats, making it difficult for the business to absorb material events such as loss of key personnel and customers
Lack of control : Businesses rarely give up a big portion of their shares to investors, making most investors a minority shareholder individually or collectively. Minority shareholders have little or no influence on how the company is run. Having said that, as a concerned shareholder, investors may make enquiries as well as to offer assistance in ways that the business owners see fit.
As a rule of thumb for all potential investors, investments made through equity crowdfunding should be in the effort to diversify one’s portfolio and to spread risks. Investors are highly advised to acquire as much information on the business they want to invest in order to make an informed investment decision and to carry out an independent due diligence if necessary.
