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How Do I Sell Shares I Purchased In an Equity Crowdfunded Company?

Once you’ve invested in a company and the offer is finalised and completed, you will become a shareholder in that company and will be entered onto the company’s share register. 

Such investments tend to be long term as companies that use equity crowdfunding to raise capital ultimately use the funds to reach their next growth target. As such, you are unlikely to have a chance to readily sell your investment, if at all. 

Your investment is likely to be illiquid for a long time– even if the business succeeds (this just means that you are unlikely to be able to sell your equity in the company to someone else for cash).

At present there is no truly liquid secondary market for equity crowdfunding. Seedrs, for example, have their own internal exchange, but you can encourage the directors of your business to subscribe to a secondary matched bargain site, such as JP Jenkins or Asset Match

The only way you can sell your shares in the business is if the business makes an ‘exit’. An exit can be in the form of:

  • Initial Public Offering (IPO) – The business grows to a point where it decides to list on the stock market. listed, investors will be able to sell their shares on the stock market.
  • Trade sale – Another company decides to buy out the business. Investors will be paid for their stake at the purchase price.
  • Share buyback – Company management decides to buy back equity (shares) from its investors (this would require shareholder approval, and a selective buy-back would require a special resolution usually 75% of shareholders in the class affected).

Get in touch with NextFin today and we can introduce you to the above matched bargain sites.

Authors: Sacha Bright & Oliver Murphy

Disclaimer

To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. Nextfin is not liable for any damages arising from the use of or inability to use this site or any material contained in it, or from any action taken as a result of using the site. 

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