What is the Seedrs secondary market?May 03, 2022
The secondary market, currently only available on the Seedrs platform, provides an opportunity to offer investors in your business a chance to get a return on their investment earlier than traditionally possible, by giving them a chance to sell some or all of their shares, hopefully at a profit. A secondary campaign offers equity from existing shareholders, or "sellers". This differs from a primary campaign where 'new' equity is issued by the business. However, the timings of the campaign will be the same - 30 days. Secondary campaigns are not eligible for SEIS / EIS relief.
Currently, Seedrs secondary market is the ONLY fully functioning equity secondary market in the UK. It enables investors to trade shares of businesses that have previously raised investment on seedrs. It also allows new investors to invest in a business which may not currently be publicly fundraising, which is attractive for companies looking to increase their investor base without having to partake in a full fundraising round.
In normal crowdfunding campaigns, investors usually need to hold onto their shares until the company experiences a significant liquidity event: eg, decides to either go public through an IPO, or gets acquired. These options typically take some years to become available. Because of Seedrs' nominee structure, Seedrs acts as the main shareholder in a company, which makes selling shares in the company easier to do. They provide the platform to list the shares, the documentation to sell and transfer ownership to a new recipient, plus a safe and secure payment system.
Will it change anything for the business?
The only element that might vary over time is the number of investors in a business. An investor could buy the shares of a fellow investor, or they could sell their shares to 2 or more new ones. As a result the exact number of investors will fluctuate over time, but this is not something that will cause any problems.
The market opens for one week per month, beginning on the first Tuesday of every month at 11am and ending the following Tuesday at 11am. The period is known as ‘Trading Tuesdays’.
Here’s an overview of how it works:
- A shareholder requests the sale of shares they own
- Seedrs checks shares are eligible to be sold
- Shares become available on the Seedrs Secondary Market
- A new investor has the option to buy the share lot and deposits funds to their Seedrs investment account to be held in escrow
- Both buyer and seller sign the transfer agreement
- Funds are released from escrow and paid directly into the seller’s Seedrs investment account.
- At the same time the shares are transferred to the buyer and the transaction completed.
You can read more about Seedrs secondary market over at the Seedrs Entrepreneur website.