Crowdcube, the largest crowdfunding platform by volume in the UK that is also active in continental Europe, has announced a secondary offering platform labeled the Direct Community Offer (DCO).
According to Crowdcube, the secondary trading platform seeks to “reward early investors with the opportunity to sell some shares, with the added benefit of being able to give your community, and ours, the chance to buy a stake in a business they believe in.”
Crowdcube wants to solve the liquidity challenge of “later stage” firms calling the feature an “exciting next step in the evolution of investment crowdfunding.”
In a blog post, Crowdcube explains:
“The product will be open to European later-stage businesses looking for alternative ways to create liquidity. It addresses a key trend of companies, like Slack and Spotify, moving away from buzzy IPO listings to direct listings. The DCO connects three sets of stakeholders: entrepreneurs who wish to offer their communities a stake in their business, new investors via Crowdcube, and the current shareholders in the business who want to take up the opportunity to sell shares.”
It appears the secondary platform is not limited to issuers that raised capital on the Crowdcube platform thus creating an entirely new vertical for the Fintech.
Crowdcube notes that the rising burden, and affiliated cost, of going public has compelled firms to remain private as long as possible. Crowdcube is now providing a path to match supply with demand in securities that have not completed a traditional IPO. Crowdcube will use its campaign expertise to aid in the market making function while driving overall community engagement.
“We’re applying the experience and expertise that we have developed by funding 90% of the most popular primary equity crowdfunding raises in Europe, and applying that to secondaries,” stated Crowdcube.
The DCO is described as a bespoke service that is only accessible to companies that meet a set of strict criteria.
Crowdcube’s move into secondary transactions has been a long time coming. The platform had previously indicated its interest in creating a marketplace for secondary share transactions. Competitor Seedrs has created an effective, yet small, securities trading platform that has iterated and grown over time.
Liquidity in private securities has long been a hurdle for the securities crowdfunding sector. If successful, Crowdcube will enable issuers that have raised capital on its platform a path for investors to have an exit, beyond an IPO or M&A, while leveraging its tech stack for non-crowdfunded securities yet firms that want to provide liquidity for early investors.
Crowdcube’s most recent quarterly report delivered £1.2 million in revenue during Q2, down 37% compared to the same period last year. According to the company, 59 businesses funded in Q2, an increase of 9% compared to Q1 and 16% uptick compared to the same period in 2019.