{"id":6121,"date":"2018-05-18T09:06:47","date_gmt":"2018-05-18T08:06:47","guid":{"rendered":"https:\/\/www.seedrs.com\/learn\/?p=6121"},"modified":"2024-07-30T15:54:28","modified_gmt":"2024-07-30T14:54:28","slug":"what-is-the-seedrs-secondary-market","status":"publish","type":"post","link":"https:\/\/europe.republic.com\/insights\/investing-features-insight\/what-is-the-seedrs-secondary-market","title":{"rendered":"What is the Republic Europe Secondary Market?"},"content":{"rendered":"

The Republic Europe Secondary Market <\/a>allows buyers and sellers to trade their shares in private companies. The <\/span>market represents an opportunity for early investors in startups and other private companies to potentially realise  liquidity before a formal exit opportunity, and is the only fully functioning early-stage equity secondary market in the UK. <\/span><\/p>\n

As a private company shareholder, the market enables you to sell your private  shares regardless of whether the business has raised investment on Republic Europe before. <\/span><\/p>\n

As an investor, the market enables you to invest in new private businesses, even when they\u2019re not currently fundraising.<\/span><\/p>\n

The Republic Europe Secondary Market now offers over 700 businesses to invest in when the market opens during the first week of every month with many thousands of individual share lots offered up to investors. The market has transacted over \u00a320M since its inception, and is now averaging \u00a3640,000 of trades per month.<\/span><\/p>\n

Why it\u2019s an industry game-changer<\/b><\/h4>\n

Without access to a secondary market, investors normally need to hold onto their shares until the company goes through a full exit event; it is either sold, goes public through an IPO, or a private sale occurs. All of these can take several years, and over the past two decades these timelines have extended even further with many companies able to access growth capital that keeps them private for longer.<\/span><\/p>\n

An investor may have enjoyed healthy paper returns already and the Republic Europe Secondary Market provides them the opportunity to realise these before a full exit event.<\/span><\/p>\n

The Republic Europe Secondary Market also makes it easier for companies to bring in new, committed shareholders without having to raise a fresh funding round.<\/span><\/p>\n

How it works<\/b><\/h4>\n

The Republic Europe Secondary Market opens for one week per month, beginning on the first Tuesday of every month at 11:00 am and ending the following Tuesday at 11:00 am.<\/span><\/p>\n

Here\u2019s a quick overview of how the market works:<\/span><\/p>\n

    \n
  1. A shareholder requests to sell a specific allocation of shares they own, known as a share lot, and signs the sell-side of the Transfer of Beneficial Ownership agreement<\/li>\n
  2. Republic Europe checks if the business is eligible for Secondary Market trading before the market opens<\/li>\n
  3. If the business is eligible to be traded in this cycle, the share lot will be listed when the market opens<\/li>\n
  4. A buyer buys the share lot, either paying with a debit card or credit associated with their investment account<\/li>\n
  5. The buyer signs the buy side of the Transfer of Beneficial Ownership agreement, and payment is confirmed<\/li>\n
  6. The seller is notified that a buyer has been found. The seller has 3 days to confirm the sale<\/li>\n
  7. Once the sale is confirmed, funds are released and paid directly into the seller\u2019s Seedrs investment account<\/li>\n
  8. At the same time the shares are transferred to the buyer and the transaction is complete<\/li>\n<\/ol>\n

    Secondary trading isn\u2019t something new for us, and one of the many reasons we designed our <\/span>nominee structure<\/span><\/a> at inception was to make trading as simple and straightforward as possible. <\/span><\/p>\n

    Because we hold shares in each business as nominee, we\u2019re able to take care of the whole transaction process from end-to-end, without the company whose shares are being traded needing to get involved with time-consuming administrative matters. <\/span><\/p>\n

    Without a nominee, the mechanics of trading shares would be substantially more complicated.<\/span><\/p>\n

    How are share lots priced?<\/b><\/h4>\n

    For primary raises on Republic Europe, the company sets its own valuation and through calculations we ensure that the share price is correct. <\/span><\/p>\n

    On the Republic Europe Secondary Market, the company\u2019s share price is marked at ‘fair value’. This is based on the share price from its most recent investment round, and is impacted by up-to-date information that we hold on the company.<\/span><\/p>\n

    Investors are able to request to sell their shares on the Secondary Market at a premium or a discount. This can be above or below the fair value, subject to a minimum share price of \u00a3.01\/share and maximum of 500% the current valuation share price. You are encouraged to perform your own due diligence on the company before making any buy or sell decisions when using the Secondary Market. <\/span><\/p>\n

    The price that shares are sold at on the Secondary Market does not impact the company\u2019s share price or its indicative valuation shown in your Republic Europe Portfolio. All businesses will continue to be valued in line with Republic Europe\u2019s Valuation Policy.<\/p>\n

    Why is the market only open one week per month?<\/b><\/h4>\n

    The one week cycle per month allows the Secondary Market to function efficiently. <\/span><\/p>\n

    For investors, having the market open one week per month focuses demand, and enables share lots to be discovered easily. For businesses, the one week format keeps the burden on them as light as possible.<\/span><\/p>\n

    Early-stage equity of ambitious, growth-focused businesses is a high-risk asset class. However, investing in early-stage private companies can offer the potential for high returns. Historically this asset class has been highly illiquid which means investors have, until now, had to generally hold their investment for many years before potentially realising a return. With the Republic Europe Secondary Market there\u2019s an opportunity to exit from an investment much earlier than would otherwise be possible.<\/span><\/p>\n

    Can I sell the shares I just bought?<\/b><\/h4>\n

    When you make an investment you are able to see if shares in the business will be eligible for Secondary Market trading in the campaign\u2019s Key Features.<\/span><\/p>\n

    \"\"<\/p>\n

    Not all shares are available to be traded on the Secondary Market. Some companies don’t allow trading on the Market, and others only allow trading between existing shareholders. However, the vast majority of businesses that raise with us do allow trading. In each of the last 12 trading cycles there have been more than 500 businesses available.<\/span><\/p>\n

    If you\u2019ve just purchased shares through a primary campaign, then the shares won\u2019t be eligible for sale immediately. The funding round has to close and be completed before shares become. If the company has opted to use the Secondary Market, once the shares have been issued they will become eligible for trading.<\/span><\/p>\n

    If you\u2019ve purchased shares through the Secondary Market, once the sale has completed you should be able to post the shares for sale immediately, provided the eligibility of the business hasn\u2019t changed since you purchased.  <\/span><\/p>\n

    What impacts business\u2019 Secondary Market eligibility?<\/b><\/h4>\n

    Republic Europe-funded business will not be eligible to be listed on the Republic Europe Secondary Market if:<\/span><\/p>\n