The Social Stock Exchange seeks to become the first worldwide access point for profitable impact investment opportunities.
Its entire business model is based on stimulating progress by innovating a disruptive profit‑with-purpose investment exchange.
The Social Stock Exchange’s mission and vision is to revitalise existing capital markets, and change the way these markets work to serve society’s purposes.
How? By giving investors who value both social impact an opportunity, empowering them to connect their financial activities and liquidity with positive-impact markets and communities working towards a prosocial, sustainable global economy.
By investing in the Social Stock Exchange, which collaborates with ICAP Securities & Derivatives Exchange (ISDX), to give Issuer Members the ability to access a live dedicated public financial market for impact businesses through its branded social impact segment on both the Growth Market and Main Board of ISDX.
The Social Stock Exchange currently boasts 44 members (as of September 2016). The Social Stock Exchange’s mission is to change the world, and your contribution is key.
The Social Stock Exchange is seeking to raise 500,000 GBP minimum and 5M GBP maximum, with 250k GBP already invested by Inventures, a venture capital fund investing in companies having a positive societal impact. This project impacts everyone, and therefore anyone can contribute to this crowdfunding campaign, whose objective is to raise from 250,000 GBP to 2,750,000 GBP.
Together we can multiply our impact.
SSX thinks the current investment model is broken. The Social Stock Exchange has the objective to fix it.
It’s no longer just about making more money. It’s about making money more: more sustainable, more impactful, more responsible.
Enter Impact Investing.
Money is the currency that can create change, but do you know who’s impacted by your investments? The global landscape is changing and investors are being drawn into a world where they are disconnected from their money, not knowing how it is affecting those around them. From COP21, to Brexit, to the Sustainable Development Goals (SDG), we are at a crossroads in global capitalism and a solution is needed.
A radically new kind of stock exchange is accelerating the way capitalism can work for the people, but also for the planet and potential profit. The Social Stock Exchange empowers all, from people to businesses and investors, to create and share real value. This is the logical outcome from the urgent need for a socially impactful capitalism that creates an equal society, based on the following equation:
That’s why the Social Stock Exchange seeks to become the first worldwide access point for profitable impact investment opportunities. Its entire business model is based on stimulating progress by innovating a disruptive profit‑with-purpose investment exchange.
For the people. For the planet. For businesses and investors both willing and able to invest in profitable markets that work towards making the world a better place.
If we want to change the world, we all need to change the way capitalism distributes wealth. For this, we need to change the way capital markets work, period. We need to make capitalism work for everyone.
The Social Stock Exchange helps to unlock capital at scale, via a growing community of global social-impact investors, for all organisations and businesses that can demonstrate a social or environmental impact through their core activities.
At the heart of the Social Stock Exchange process lies the Impact Report, an independent tool used by qualifying companies to document and evidence this impact, which is published before they can be formally admitted on to the exchange.
Through its collaboration with the ICAP Securities and Derivatives Exchange , the Social Stock Exchange aims to give Members the ability to access a dedicated, live, public financial market for impact businesses on both its Growth Market and Main Board.
The Social Stock Exchange also supports early-stage impact businesses through private-placement capital raised for business development.
By investing in the Social Stock Exchange, you support a project that wants to lay the first bricks of the first impact investment market place.
You can start investing from 100 GBP.
The Social Stock Exchange’s mission and vision is to revitalise existing capital markets, and change the way these markets work to serve society’s purposes.
The Social Stock Exchange’s mission and vision is to revitalise existing capital markets, and change the way these markets work to serve society’s purposes.
How? By giving investors who value both social impact and opportunity, and financial return access to innovative capital markets, empowering them to connect their financial activities and liquidity with positive-impact markets and communities working towards a prosocial, sustainable global economy.
By investing in the Social Stock Exchange, which collaborates with ICAP Securities & Derivatives Exchange (ISDX), the Issuer Members get the ability to access a live dedicated public financial market for impact businesses through its branded social impact segment on both the Growth Market and Main Board of ISDX.
The Social Stock Exchange wants to change the world, and your contribution is key:
The Social Stock Exchange is seeking to raise 500,000 GBP minimum and 5,000,000 GBP maximum, with 250,000 GBP already invested by Inventures, a venture-capital fund investing in companies having a positive societal impact. This project impacts everyone, and therefore anyone can contribute to this crowdfunding campaign, whose objective is to raise from 250,000 GBP to 2,750,000 GBP.
Together we can multiply our impact.
The strategic goal of Social Stock Exchange is to:
1. The Social Stock Exchange Members
Promoting the social and environmental benefits of its members is a key focus of the Social Stock Exchange. Members join a leading group of businesses dedicated to social and environmental change through their core financial activities.
A brief look at some of its members illustrates the diversity and scope of impact of the Social Stock Exchange:
For the full list of the Social Stock Exchange members making a positive impact, click here.
2. Investors
Investors who care about sustainability are better investors overall. Why? They are in it for the long term, which generates better returns than short-term investments.They care about the planet and therefore have a more diversified portfolio.They don’t cut corners to capitalise on short-term profits and results
Tomas Carruthers, CEO of Social Stock Exchange
The Social Stock Exchange enables companies to be listed, thereby facilitating investment in impact companies (private equity/private placement/bond). Securities can be bought, sold and managed as part of a regular portfolio.
3. The people behind the Social Stock Exchange
Social Company Advisers (SCAs)
The Social Stock Exchange has developed strategic partnerships with the City of London and beyond to bring together stakeholders with the right skillsets to assist members in raising their profile and capital. To that end, and to deliver value to its members, the Social Stock Exchange has partnered with 19 Social Company Advisers (SCAs) to support transactions, good governance and multi-stakeholder engagement.
Currently, the Social Stock Exchange is consulting with two types of partners:
About the staff: Fifteen percent of the Social Stock Exchange’s share capital will be allocated to staff as share options. The intention is to help align the Social Stock Exchange’s vision and mission with the whole team and ensure that all staff share in the success of the company as it grows with future investors and the help of the MyMicroInvest crowd.
1. Access to public markets:
The Social Stock Exchange was founded in 2013 as a company providing information and a framework (the Impact Report) to assess the impact of businesses in the UK. Today, that mission is to promote the impact sector by giving all investors, big and beginning, the opportunity to invest in impact businesses working to make the world more sustainable with new growth opportunities, better jobs and fairer prospects.
The Social Stock Exchange helps vetted social-impact companies access markets.
Of the 40 Issuer Members, 27 are currently private companies because of their early stage nature, and 13 are listed. Of the listed members, 5 are listed on ISDX in the SSX dedicated market segment for qualifying social Impact companies (4 are listed on the Growth Market and one is listed on the Main Board) and of the other 8 listed Issuer Members, 5 are listed on AIM and 3 are listed on the LSE.
2. Qualitative & quantitative impact assessment, aligning businesses & investor values:
To join the Social Stock Exchange, companies undergo a transparent and rigorous selection process that is independently validated in an Impact Report. The Impact Report template and metrics are clearly defined and the Social Stock Exchange regularly sits with social and environmental-impact assessment experts to improve the quality, framework and data of this report. The latest Impact Report is available here: http://socialstockexchange. com/assets/new/docs/SSX_Impact_Report_template_V3.pdf).
3. Generating demand in the impact sector:
In 2015, a total of 413.9M GBP was raised by the Social Stock Exchange members, 389M GBP on the official list of LSE, 4.9M GBP on AIM and 20M GBP via a partner, Funding Affordable Homes The same year, a record-breaking 54 applications were received (versus 9 in 2014), suggesting that there is a demand for impact investments opportunities if impact can be evidenced robustly. In 2015, the pass rate was 50% from initial application to membership.
A general misconception is that, due to a lack of visibility and credibility on financial markets, impact businesses are not profitable and are therefore not viable investment opportunities. The Social Stock Exchange addresses this challenge by verifying companies’ impact credentials via a carefully designed admission process. Impact investing can trigger a profitable cycle that scales because it matches profit with purpose.
4. Scaling impact:
The Social Stock Exchange wants to help impact businesses scale their activities by raising their profiles, improving their visibility and connecting companies to financial advisers, consultants and investors. This is achieved in various ways, e.g. through a vibrant events programme with access to impact investors, members’ networking events as well as an annual investor conference.
In 2015, the Social Stock Exchange directly raised more than 20M GBP for one member, enabling them to scale their activities and invest in projects that generated genuine positive impact. Most businesses are seeking to raise 1-50M GBP, with the majority looking for 5-15M GBP.
5. Democratising finance:
The Social Stock Exchange members’ securities can be bought and sold in small volumes to investors. This enables investors to invest in projects that either relate to their local community or in specific impact areas such as Biodiversity or Clean Energy.
6. Facilitating local impact:
Most impact occurs locally and the Social Stock Exchange’s core mission is therefore to establish local social stock exchanges that link local business with local investors and advisers.
One idea can change the world. The Social Stock Exchange is your ticket to investing with real impact in real impact markets designed to make the world a better place.
Invest now!
is now rapidly gaining ground as an investment concept that can simultaneously deliver both potential financial return and positive impact – environmental, social or ethical.
The Social Stock Exchange companies and investors enjoy benefits such as:
The Social Stock Exchange is convinced that social impact investments unleash the full transformative power of the world’s communities, as it broadens the collective identity from a me-identity to a we-identity, of which the benefits flow through and to investors.
The Social Stock Exchange’s aims and measures reflect this shift to impact investing, and are protected under the company’s Shareholder’s Agreement which states that they cannot be amended without a shareholder resolution of at least 75% approval.
1. Promoting social enterprises and socially responsible businesses by enabling both to raise their profile, attract investments, and increase their capital
2. Increasing the total amount of capital flowing to the social enterprise sector
3. Facilitating the value creation of social enterprises
4. Advocating the adoption of social impact metrics and outcomes
1. The total number of social enterprises and socially responsible businesses
2. Securities in social enterprises and socially responsible businesses listed on the Social Stock Exchange
3. The gross amount of capital raised at IPO or further placements and issues by securities listed on the Social Stock Exchange
4. The total value of securities listed on the Social Stock Exchange on a volume-weighted average basis
Below you’ll find a series of market reports, research books and guides to help you learn more about the Social Stock Exchange members and Impact Investing as a whole. Click on the titles to read more.
Insight into the Impact Investment Market, a research report released by J.P. Morgan and the Global Impact Investing Network (GIIN)
This report finds that the majority of the 52 surveyed impact investors have tempered optimism about the impact investing industry: they believe it is “in its infancy and growing”. The investors plan to invest almost $4 billion over the next year, and most expect that 5-10% of overall portfolios will be allocated to impact investments in ten years, indicating there is room in the market for a range of performance.
What is it all about
This is the Beginner’s Guide to all things impact investing. It contains a definition of impact, provides a history of the movement, and establishes some criteria for helping you understand how to identify impact businesses.
Impact Investing: Measuring social and environmental impact
Impact needs to be measured to be meaningful. This guide showcases the many criteria for understanding impact, and can help you make up your own mind on what impact is and how to measure it.
CEO
Tomás Carruthers is Chief Executive Officer of the Social Stock Exchange (SSX). After two successful decades building and growing retail financial services companies – including ESI, which became E*Trade UK and Interactive Investor International plc – Tomás is now committed to delivering not only great returns for investors, but a positive social or environmental impact, too. Tomás is passionate about innovation in finance and is determined to bring impact investing into the mainstream.
CFO
Paul has over 25 years of experience in corporate strategy, visioning and finance, driving strategic change, innovation and performance improvement throughout an organization both organically and through M&A transactions. He has a core track record of building businesses in retail financial services, particularly in the online brokerage and online media sectors. For 9 years he worked for Interactive Investor, a regulated stockbroker and online media site. Of those 9 years, he was Head of Finance for 5 years, and led the growth of retail investment products, achieving 10 times growth in revenues and achieving profitability. Paul’s experience ranges across start-ups and large corporates both as a consultant and as an employee. He has led many capital raisings and M&A transactions both from within a company and as an adviser, and is experienced in financial planning and management, leading businesses into growth and profit.
COO
After serving in the Army for thirteen years, Richard began his commercial career at Reuters initially running Lipper’s European data operations before moving to the US to take over global product development and delivery. He then moved on to become Chief Operating Office at Citywire where he spent 5 years helping grow a forward thinking and innovative, financial media business. After a brief spell with Times Education as their Digital Director, he moved on to become Operations Director for Centaur Media plc. Initially, he was responsible for the Legal and Financial divisions before taking over the operational leadership for Business Publishing, where he led the re-branding and relaunches of numerous magazines and digital propositions.
Manager
In January 2016, Debbie joined the Social Stock Exchange as Director of Partnerships to implement their regionalisation strategy, the aim being to make impact investing accessible to all. She began her career in the public sector and spent a successful 20 year period first in the Home Office and then the Prison Service. In this capacity, she supported many projects in a variety of countries including Slovenia, Czech Republic, Germany, The Netherlands and Poland. Subsequently, she served as a Director at both Working Link and G4S.
The following description is taken from the Prospectus. For more information on the investment mentioned in this section, you are invited to read the Prospectus, in particular the risk factors described therein and summarised in the table “Risks”, before making any investment decision (eg. loss of capital).
SSX is of the opinion that, taking into account its available cash and cash equivalents on July 31, 2016, the Company does not have sufficient working capital for its present requirements, that is for at least the 12-month period from the date of the Prospectus. Based on current projections and expectations, the Directors are of the opinion that the Company needs further funding of 250,000 GBP by the end of 2016 in order to have sufficient working capital for at least the next 12 months and to prevent a shortfall in working capital occurring in Q1 of 2017. If this capital raise does not successfully raise a minimum of 250,000 GBP by the year-end 2016 and alternative sources of financing cannot be identified to cover such a circumstance, there is a risk of insolvency in the short term.
Social Stock Exchange closed its latest Financial Year on 31 July 2016. The audited financial accounts were approved by the Board of Directors and auditors for publication on 7th October 2016.
The numbers presented below are expressed in GBP.
The attention of the potential Investors is directed to the fact that Social Stock Exchange has been in deficit since its incorporation in 2007 with cumulative losses over previous years totalling 3,502,703 GBP as at 31 July 2016.
Assets
The intangible assets booked for an amount of 16,465 GBP on the balance sheet consist of software development costs (website and platform development and CRM software development). Tangible fixed assets (8,639 GBP) represent plant and machinery. Receivables expected within one year include trade receivables, prepayments and a service retainer. Cash has decreased by 325k GBP in the year ended July 2016 in line with operational losses incurred during the year as Social Stock Exchange grows the business towards break-even, offset by cash raised from capital increases of 554k GBP and debt repayments in cash of 83k GBP in the year.
Liabilities
Social Stock Exchange must repay, over the rest of 2016 21,856 GBP to Panahpur, being the remaining balance of the two loans provided by Panahpur in April and June 2015. Social Stock Exchange has no other loans. Trade debts are accounts payables, including the usual trade creditors and PAYE and National Insurance contributions owing to HMRC.
The total amount of share capital as at 31st July 2016 was 3,690,702 GBP with a total number of ordinary shares issued of 1,889,953.
Income Statement
The numbers presented below are expressed in GBP.
* EBITDA: Earnings before Interest, Taxes, Depreciation, and Amortization
Social Stock Exchange has been able to increase its revenues year-on-year since 2012. Social Stock Exchange counts 40 businesses- and organisations-Members – this more than doubled in 2016. All of whom support its vision of positive impact. The revenue increase has been generated thanks to an increasing number of impact companies, social company advisers and events.
Social Stock Exchange’s main operational expense is remuneration, social charges and pensions. The increase in remuneration between the financial years of 2013, 2014, 2015, & 2016 are a result of the business beginning to operationalise and grow headcount to build out the organisation. By end of the financial year of 2014, the number of employees had grown to 6 (including the new CEO, Tomas Carruthers), by the end of the financial year of 2015, thenumber of employees had grown to 9 (including the new COO, Richard Cook, and CFO, Paul Burniston) and as at July 2016, it stood at 11. Moreover national Insurance, pension and medical insurance benefits are available to all the staff.
While remuneration is increasing, Social Stock Exchange has focussed in FY16 (from August 2015 to July 2016) on managing other operating expenses so that revenue growth could flow to the bottom line. Social Stock Exchange has reduced accommodation costs, research and development and platform operating costs and sales & marketing costs. On the contrary, legal and professional fees have increased in FY2016 as Social Stock Exchange became regulated as an Appointed Representative.
Cash flow statement
From the end of July 2015 to the end of July 2016, accounts receivables have increased significantly more than accounts payables as a result of increasing sales with flat or lower costs, leading to an increase in working capital requirement.
The main investments made by Social Stock Exchange are in website development, the design, configuration and implementation of a CRM system and in computer equipment and laptops for staff in line with hiring increases.
Since its incorporation, Social Stock Exchange has made several capital increases, with the latest in July 2016 (250,000 GBP invested by Inventures) and April 2016 (621,801 GBP) for a total balance as at 31st July 2016 of 3,690,702 GBP.
Social Stock Exchange is of the opinion that taking into account its available cash and cash equivalents on July 31, 2016, the Company does not have sufficient working capital for its present requirements, that is for at least the 12-month period from the date of the Prospectus. Based on current projections and expectations the Directors are of the opinion that the Company needs further funding of 250,000 GBP by the end of 2016 in order to have sufficient working capital for at least the next 12 months and to prevent a shortfall in working capital occurring in Q1 of 2017. If this capital raise does not successfully raise a minimum of 250,000 GBP by the year-end 2016 and alternative sources of financing cannot be identified to cover such a circumstance, there is a risk of insolvency in the short term.
The 3-year financial plan, developed by Social Stock Exchange’s management, is presented here below. Social Stock Exchange has developed the key assumptions based on a combination of their experience, market practice, market statistics, if available, and performance of the Social Stock Exchange to date.
Social Stock Exchange has developed a financial plan that is built around six types of revenue.
– Impact companies and businesses memberships: These are the recurring annual membership fees received from social and environmental impact enterprises
– Adviser members fees: These are the recurring annual membership fees received from SCAs
– Cap raise fees: These are success fees where Social Stock Exchange has helped its members raise capital
– Listed market fees: Some Social Stock Exchange members are listed on ISDX social segment. These are then the revenue share arrangements from the collaboration agreement with ISDX
– Media Revenues: These revenues are sponsorship and advertising revenues from organisations that sponsor Social Stock Exchange’ events and / or website.
– Other Revenues
Volumes
* From January to December 2016
** Issuer Members are companies and social enterprises delivering a social and/or environmental impact which become a member of the Social Stock Exchange after having been accepted by the Admissions Panel.
*** Fully Listed Members are Issuer Members of Social Stock Exchange whose shares, bonds or other financial instruments are listed on the Social Stock Exchange market segment of the ISDX market either the Main Board Market or Growth Market. To qualify for listing in the Social Stock Exchange segment of the ISDX market, Issuer Members must pass both Social Stock Exchange and ISDX’s admission process requirements.
The main drivers of volumes are the following, controlled and influenced by the management and the board of directors:
– The number of issuer members (impact companies) is based on Social Stock Exchange experience. Social Stock Exchange has 44 issuer members to date (end of September 2016) and plans to reach more than 50 issuer members by the end of December 2016. This forecast includes the risk of Issuer Members de-listing or not renewing their membership.
– Social Stock Exchange forecasts an increase of the number of adviser members from 18 to 22 by the end of 2016. Based on the interest shown by some larger advisers, it is likely that the average revenue received per adviser may increase compared to the average fees charged in 2015.
– The assumptions for the capital raised by issuer members are based on the number of expected issuer members. Social Stock Exchange has assumed that 50% of new issuer members would be raising capital. Social Stock Exchange currently has several live projects where they are assisting issuer members to raise capital and forecasts to close them in early 2017.
– Social Stock Exchange expects 50% to 66% of the issuer members to list securities justified by the following two assumptions:
– Many new issuer members should be early stage companies looking for private placement rather than listing in the first instance;
– Social Stock Exchange is looking at businesses which are already listed on other exchanges to become members.
– Social Stock Exchange expects to be running 8 events per year based on their experience of running similar events and media sales.
These drivers should lead to an increase of the different volumes, except capital raised as conservative assumption.
Price
* From January to December 2016
The pricing of membership fees (issuer members and advisers), shown in the forecasts, is based on Social Stock Exchange’s current pricing model and does not take into account any increase for inflation or increased margin. Issuer membership fee depends on the instrument being issued (equity, bond or fund) and the market capitalisation of the issuer member. The price for cap raise fee (success fee) notably depends on the average size of raise. Listed market fee is based on the ISDX price list for transaction fees.
Revenues
* From January to December 2016
There is a risk that the objectives of Social Stock Exchange will not be reached, which could lead to a significant reduction of the expected revenues and thus a risk of insolvency. This could result in a low return or even in a total loss of the investment for the investors.
Gross margin – Costs of goods/services sold (variable costs)
Cost of goods sold represents a proportion of the cap raise fees, as Social Stock Exchange will have to share these revenues with third parties (brokers and distributors) who will help Social Stock Exchange manage and generate this revenue. This item also includes the costs linked to the media revenues.
Fixed costs
Remuneration, social charges and pensions is the most important cost category as these make up just over 70% of the projected expenses over the 4-year forecast period. It will continue to increase between 2016 and 2019 due to several reasons:
– The on-costs include medical insurance, employer pensions contributions and employer’s National Insurance contributions;
– A continuous planned increase in workforce based on the expected increase of volume of business;
– From 2017 onwards, Social Stock Exchange expects the workload and business volumes to drive headcount on a more linear basis;
– A fall of average salary as the core executive management team is already in place and new staff will mainly be employed in sales and operational functions
The next major category of expense, after headcount related costs, is accommodation and general expenses. These are assumed to grow in line with headcount as accommodation requirements increase.
Sales and Marketing costs are expected to grow as Social Stock Exchange develops more case studies from success stories to promote and market them.
R&D is expected to increase as Social Stock Exchange move forward as Social Stock Exchange will want to innovate and develop its impact reporting methodology.
The financial plan below is the result of the assumptions explained above. Based on the above assumptions, it is expected that Social Stock Exchange will turn into a profitable business, from an operational point of view (see EBITDA: before depreciation & amortizations), over a full year, in 2017 on a sales volume over 1,500,000 GBP in that year.
* From January to December 2016
** EBITDA: Earning Before Interest, taxes, Depreciation, and Amortization
* From January to December 2016
MyMicroInvest operates a crowdfunding platform that enables the public to finance innovative companies by participating in their capitalisation. The investment offered, for a minimum amount of 100 GBP, comprises Notes issued under Belgian law which represent a claim against the issuer, MyMicroInvest Finance, a public limited company under Belgian law having its corporate headquarters at Place Sainte Gudule 5, 1000 Brussels (n°5 38.839.354, R.P.M. Nivelles).
The total amount brought in at the end of the offer shall be used by MyMicroInvest Finance to subscribe to a capital increase in The Social Stock Exchange. The Notes are denominated in Pounds. They do not offer any guaranty of yield or of reimbursement of capital. The Notes have an unlimited duration and the duration and the sum reimbursed depends entirely on the performance of the investment made via the proceeds of the Notes issued by MyMicroInvest Finance.
The nominal value of the Notes corresponds to the sum of the subscription and does not include the costs of the issue nor the payment of expenses described below. MyMicroInvest Finance charges an additional subscription fee amounting to 5% of the nominal amount. The expenses linked to the payment of the subscription amount are borne by the investors. They amount to 1.85% in case of credit card payment and 2% in case of bank transfer, and are null if the bank transfer is made directly online on the website www.mymicroinvest.com. The Noteholders bear the Expenses Relating to the Underlying Assets. The amount of the Expenses Relating to the Underlying Assets, which are not capped, is not determinable at this stage.
The investors should be taxed on the income paid by MyMicroInvest Finance as if such income were paid directly to them (as dividends subject, as a general rule, for private individuals who are Belgian residents, to a withholding tax of 27% pursuant to article 269 of the Income Tax Code, or capital gains). It is necessary to read the Prospectus attentively before subscribing to the Notes, and in particular, to consider the risk factors that are described therein before making any decision on investment.
We draw the attention of the potential investor to the fact that there is a risk that the goals of The Social Stock exchange will not be reached, which might lead to a substantial reduction in the expected revenue and thus incur a risk of insolvency or at least of low yield, even zero or negative yield for the investors. The Social Stock Exchange has been in deficit since its incorporation in 2007, with cumulative losses over previous years totalling 3,502,703 GBP as at 31 July 2016.
It is not intended to list the Notes on a market and, thus, their liquidity is not guaranteed.
Any complaint relating to an investment in the Notes can be addressed to the headquarters of the issuer indicated above or to the Service de Médiation pour le Consommateur, Boulevard du Roi Albert II 8 – 1000 Brussels, tel.: 02/702.52.20, fax.:02/808.71.29, email: contact@mediationconsommateur.be.
Joseph Rowntree Charitable TRUST has notified to Social Stock Exchange that they would like to sell their shareholding in Social Stock Exchange.
The capital increase to which MyMicroInvest Finance will participate is part of a broader funding of Social Stock Exchange considered between 500,000 GBP and 5,000,000 GBP.
This financing can be broken down as follows:
– A first capital increase (the “First Capital Increase”) of 250,000 GBP was subscribed in cash on July 22nd, 2016 by Inventures SA at a pre-money valuation (i.e., valuation prior to the First Capital Increase) of 4,474,884 GBP, i.e. at a price per share of 2.5 GBP.
– Between minimum 250,000 GBP and maximum 2,750,000 GBP (depending on the result of the issue of the Notes) shall be contributed by MyMicroInvest Finance in a second capital increase of Social Stock Exchange at pre-money valuation of 4,724,884 GBP (i.e., valuation after to the First Capital Increase) (“the Second Capital Increase”). Up to 4,500,000 GBP will be invested by other investors, i.e business angels as part of the Second Capital Increase, as long as the Second Capital Increase does not reach a maximum of 4,750,000 GBP.
Both the First and the Second Capital Increases has been/will be made at a subscription price per share of 2.5 GBP.
The table below indicates the distribution of the shares of the company following the Total Capital Increase assuming that the result of the issue of the Notes allows MyMicroInvest Finance to subscribe the minimum amount of 250,000 GBP and there is no additional amount raised at the Second Capital Increase to the amount subscribed by MyMicroInvest Finance.
The table below presents the percentages of the capital held by the Social Stock Exchange account of MyMicroInvest Finance depending on the results of the Notes issue (i.e., a minimum of 250,000 GBP and maximum of 2,750,000 GBP) and the minimum and maximum amounts contributed by the other investors following the Total Capital Increase (i.e., a minimum of 250,000 GBP and a maximum of 4,750,000 GBP).
The participation of MyMicroInvest Finance in Social Stock Exchange may be diluted due to the stock option plan for the management and staff of Social Stock Exchange, enabling them potentially to acquire up to 15% of the total number of issued Social Stock Exchange shares. The exercise price for options already granted (representing 9.5% of the total issued capital as at the date of this prospectus) is 2.50 GBP per share, the same as that for the shares to be acquired by MyMicroInvest Finance as a result of the present offer.The Notes shall only be issued if the cumulative conditions precedent to the subscription of MyMicroInvest Finance in the Second Capital Increase are fulfilled within 60 business days after the Closing Date;
·The total amount of firm commitments of subscription to the Second Capital Increase reaches minimum 250,000 GBP and does not exceed 4,750,000 GBPas long as the amount to be subscribed by MyMicroInvest Finance reaches between 250,000 GBP and 2,750,000 GBP;
·The subscription price of the Social Stock Exchange shares (including issue premium) to which MyMicroInvest Finance will subscribe is based on a valuation of Social Stock Exchange before the Second Capital Increase not exceeding 4,724,884 GBP;
·MyMicroInvest Finance is granted equal rights in terms of transferability of the shares of Social Stock Exchange as those stipulated for the benefit of the other investors participating in the Second Capital Increase and MyMicroInvest Finance is granted a tag-along right with regard to all of the shareholders of Social Stock Exchange in the sense that in case of transfer of shares of more than 50% of the votes in a general meeting of the Company by any shareholder (including the sale, transfer, exchange, etc. of shares).
MyMicroInvest Finance will be able to transfer its shares in Social Stock Exchange at the same time, in the same proportion and under the same conditions.
MyMicroInvest Finance checks if such conditions precedent are fulfilled no later than 60 business days after the Closing Date (“Date of Validation of the Conditions”). In case one or several of these conditions is not fulfilled on the Date of Validation of the Conditions, the Notes shall not be issued, the subscription shall be terminated and the investors will be reimbursed the Subscription Amount no later than 15 working days from the Date of Validation of the Conditions.
The attention of the potential investor is directed to the fact that at this stage, no investor has made a firm commitment to subscribe to the Second Capital Increase.
For more information about the valuation of Social Stock Exchange, please refer to Title VI 11.3 of the Prospectus. MyMicroInvest Finance has only carried out a limited verification on the information provided by Social Stock Exchange and that MyMicroInvest Finance does not verify the investment opportunity and has no say in the price at which the shares of Social Stock Exchange, in which the net amount raised through this issue will be invested, are offered. The Investors are expected to make their own judgment about the investment opportunity based on the information given to them.
Use of Funds
The use of proceeds of the Second Capital Increase will first be applied to the working capital needs of the business i.e. 250,000 GBP for the next 12 months from the date of this prospectus, based on the forecast outlined in this Prospectus. If only the minimum amount of 250,000 GBP for the Second Capital Increase is raised, then this will be the sole use of proceeds and therefore, the investments detailed below won’t be realized leading to a minimalist strategy of development for Social Stock Exchange, as provided in the forecast presented in this Prospectus.
In order to further develop the business, over and above the growth assumed within the forecast within this prospectus, Social Stock Exchange would like to invest in a number of initiatives as detailed below. The investment costs for the possible investments listed below are not included within the financial forecast presented in this Prospectus and nor are the expected benefits to be derived from those projects. In the case of the maximum amount of the Second Capital Increase being successfully raised then Social Stock Exchange intends that all the projects listed below would be undertaken. Each investment would be subject to:
1. Individual business case justification and approval; and
2. The company having the available funds to invest in the projects either through capital raised in excess of the 250,000 GBP minimum requirement as outlined in this Prospectus, through third party provision or through cash generated within the business.
The most significant possible investments planned in the future are (by order of priority depending on the amount raised):
The following description is taken from the Prospectus ( Title II, Section D). For more information on investment, you are invited to read the Prospectus, in particular the risk factors described therein (in Title III of the Prospectus), before making any investment decision.
The terms with capitalised letters are defined in the glossary of the Prospectus.
The main risks relating to the proposed investment can be described as follows:
The following description is taken from the Prospectus (Title II, Section D).
For more information on investment, you are invited to read the Prospectus, in particular the risk factors described therein (in Title III of the Prospectus), before making any investment decision.
The terms with capitalized letters are defined in the glossary of the Prospectus.
The main risks relating to the proposed investment can be described as follows:
– The risk relating to the holding of a claim against a company that was recently founded, the Issuer, MyMicroInvest Finance, which purpose is to take participations in companies which are generally starting their activities and whose financial solidity cannot be evaluated on the basis of concrete elements. MyMicroInvest Finance’s debts are guaranteed by MyMicroInvest, the risk of insolvency of MyMicroInvest Finance is thus also linked to the insolvency of MyMicroInvest.
– The risk linked to the fact that the value of the SSX shares (i.e. 2.50 GBP per share) is the result of negotiations between existing shareholders, based on management’s financial plan and the amount of share capital invested so far in SSX, and not the result of valuations based on comparable companies, given the limited number of similar actors in the market and the absence of transaction prices. The offered price per share has, until now, been paid by a very limited number of investors and is substantively higher than the net asset value per share on 31 December 2015 (i.e. 0.15 GBP) and 30 June 2016 (i.e. 0.10 GBP). It cannot be reasonably justified by a traditional method of valuation. In addition, the offered price is highly sensitive to various factors such as variations in the profit forecasts and the survival probability of SSX. The forecasts from the management of SSX show a strong growth of revenues, primarily based on the growth rate observed in the last financial year from July 2015 to July 2016. There is no guarantee that the forecasted positive evolution in terms of revenues and profit will materialise.
– Taking into account the fact that the reimbursement and yield of the Notes depend entirely on the future development of SSX, the investment presents risks at least comparable to a direct investment in the shares of SSX, which naturally bears a high level of risk, clearly above the risks incurred with large, publicly traded industrial, real estate or financial companies. There is, in particular, the risk of losing 100% of the investment. This is all the more so that SSX activities have so far resulted in significant losses carried forward (with cumulative losses over previous years totalling 3,502,703 GBP as at 31 July 2016). It is foreseen that the activities of SSX will generate additional losses until at least 2017. The risk remains that SSX will not emerge from this loss-making condition, or not sufficiently quickly, and this could hinder its access to external sources of financing or lead to its insolvency. On the date of this Prospectus, SSX is of the opinion that taking into account its available cash and cash equivalents on July 31, 2016, the Company does not have sufficient working capital for its present requirements, that is for at least the 12 month period from the date of the Prospectus. Based on current projections and expectations the Directors are of the opinion that the Company needs further funding of 250,000 GBP by the end of 2016 in order to have sufficient working capital for at least the next 12 months and to prevent a shortfall in working capital occurring in Q1 of 2017. If this capital raise does not successfully raise a minimum of 250,000 GBP by the year-end 2016 and alternative sources of financing cannot be identified to cover such a circumstance, there is a risk of insolvency in the short term
– The risk relating to the lack of liquidity, which means that the subscriber might not find a buyer for the Notes that he might want to sell later on, as well as the risk related to the lack of liquidity of the shares of the Underlying Company, resulting in particular from the statutory and contractual restrictions on transferability, which are subject to amendment over time and which might result in difficulties for MyMicroInvest Finance to sell them whereas the final return and repayment of the Notes depend on this sale. MyMicroInvest Finance will try to obtain the best possible price on the basis of its competence but due to contractual or statutory restrictions on the transferability of the SSX Shares (i.e. a drag along right), MyMicroInvest Finance may be compelled to sell the SSX shares at a time or at conditions which are not favourable to the Noteholders. MyMicroInvest Finance can therefore not guarantee that it will be able to act in the best interests of the Noteholders.. However, any decision of MyMicroInvest Finance to sell any SSX shares shall be subject to the approval of Noteholders representing at least 75% of the SSX Notes then outstanding, except if (i) the consideration payable to MyMicroInvest Finance for the sale of the SSX shares is such that the Notes will yield, after such sale, a cumulative annual return before taxes of at least 5% since the Closing Date or (ii) MyMicroInvest Finance is required to sell pursuant to a contractual or statutory provision (e.g., a drag-along clause in a shareholders’ agreement or in the articles of association of SSX). In any case, if MMIF decides to sell any SSX shares, it is not excluded that the Issuer will postpone a part of the repayment of the Notes in case a warranty provision is agreed with the purchaser in the context of representations and warranties granted by MMIF. The total repayment of the Notes will thus be postponed until the date of the expiration of the warranty period, being understood that the duration of such period is subject to the pre-sale negotiations with the purchaser and may depend on the applicable prescription rules. During the warranty period, MMIF might be obliged to compensate the damage suffered by the purchaser because of a breach of the representations and warranties and therefore, the Net Proceeds and internal rate of return for the Noteholders will be reduced.
– The risk linked to absence of interest on the Notes to the extent that (i) the interest is said to be variable and depends on revenue received by MyMicroInvest Finance on its investment in SSX and (ii) the intention of SSX is not to pay dividends over the first years following the issue of the Notes. Distributions to Noteholders are therefore unlikely before the Maturity Date.
– The risk linked to the fact that due to the 5% Subscription Fee (charged in addition to the Nominal Amount) and due to the Expenses related to the Underlying Assets borne by the Noteholders, the return of the Notes may be negative even if the Proceeds received by MyMicroInvest Finance in relation to the shares of SSX exceed the amount invested in SSX with the proceeds from the issue of the Notes. The amount of the Expenses Relating to the Underlying Assets, which are not capped, is not determinable at this stage. A detailed statement of the Expenses Relating to the Underlying Assets will be provided to the Noteholders on the Maturity Date, and simultaneously with any payment made by MyMicroInvest Finance to the Noteholders prior to the Maturity Date.
– The risk linked to the fact that the participation of MyMicroInvest Finance in SSX may be diluted due to the stock option plan for the management and staff of SSX, enabling them potentially to acquire up to 15% of the total number of issued SSX shares. The exercise price for options already granted (representing 9.5% of the total issued capital as at the date of this prospectus) is 2,50 GBP per share, the same as that for the shares to be acquired by MyMicroInvest Finance as a result of the present offer.
– The currency risk: The Notes will be issued in GBP and will, as the case may be, be reimbursed in GBP. For the Noteholders who have a bank account in EUR, the Investors are therefore exposed to a currency risk due to fluctuations in exchange rate between EURO and GBP.
– The risk linked to the Brexit: The exit of the United Kingdom from the European Union is leading to an uncertainty on the political and economical future of the United Kingdom which might impact the activities of the companies active there.
– The risk linked to the fact that MyMicroInvest Finance has only carried out a limited verification on the information provided by SSX and that MyMicroInvest Finance does not verify the investment opportunity and has no say in the price at which the shares of SSX are offered. In its capacity as managing director of Inventures, MyMicroInvest has analysed the financial plan of SSX. On the basis of such analysis, Inventures has decided to participate in the First Capital Increase of SSX for an amount of 250,000 GBP. However, the Investors’ attention is drawn to the fact that MyMicroInvest Finance does not give any warranty and expresses no opinion on the soundness of the financial plan of SSX or on the figures and assumptions underlying such financial plan. It is up to the Investors to make their own analysis of this financial plan and to make their own judgment on the opportunity to subscribe to the Notes.
– The risk linked to the fact that the ability of MyMicroInvest Finance to select and manage participations in the target companies, and to realise capital gains on such investments has not yet been tested and is not proven. MyMicroInvest Finance has recently sold its first participation. This sale relates to all the shares held by MyMicroInvest Finance in Definitive Groove SA and results in a negative return for the holders of the notes Definitive Grove.
– The services proposed by SSX not rest on know-how or on specific intellectual property and can therefore be copied relatively easily.
– The risk linked to the fact that SSX is active in an emerging market and that this sector may not grow as expected and may limit the potential growth of SSX, limiting its ability to generate profits.
The attention of the reader is directed to the fact that there is no mandatory reporting after the offer, which means that the Investors will not receive any information regarding the value of their investment once it is completed. SSX nonetheless reserves itself the right to provide information to the Investors after the offering.