Nutmeg Delivers Returns to Crowdfunding Investors, Industry Needs More News Like This

Yesterday it was reported that Nutmeg, a digital investment manager operating in the UK, had been acquired by JP Morgan (NYSE:JPM). The Fintech had already partnered with the bank and JPM apparently decided to utilize Nutmeg’s tech as a step to launch a digital-only bank, under the Chase name, in the UK. JP Morgan acquired 100% of the outstanding shares of Nutmeg at a reported valuation of £700 million or around $973 million.

While much of the news focused on JP Morgan’s acquisition designed to buttress a new digital banking venture it should be noted that Nutmeg offered shares to retail investors on Crowdcube back in 2019. At that time, Nutmeg raised £3,783,549 in equity capital with 2168 smaller investors backing the Fintech. Nutmeg raised funding at a pre-money valuation of £251 million thus indicating a return of over 2X for shareholders.

While exact details have yet to filter out, one report indicates that JPM purchased the shares from between £30 to £32 each while Crowdcube investors bought at £12.82 a share. Not a  bad return after holding the security for just 2 years.

Investing in early-stage ventures is not for the impatient nor for individuals unwilling to shoulder the heightened risk (balanced by the hope of outsized returns). As any VC knows, the returns of a few winners make up for the failures of the many. Many startups fail over time, and while some may bounce along for years, creating an opportunity for an exit with an index beating return is not necessarily the norm. Investment crowdfunding platforms have enabled smaller investors the option to participate in risky assets that have been the exclusive realm of the wealthy in the past – a good opportunity for portfolio diversification. News like the acquisition of Nutmeg by JP Morgan is something we will hopefully be hearing more of in the coming years as crowdfunded issuers mature and some emerge as viable, profitable ventures. In the end, crowdfunding platforms, and the securities they list, will be judged by the returns generated for investors on a portfolio basis.

Another bright spot in the equation is the emergence of secondary trading platforms provided by securities crowdfunding platforms. Seedrs trailblazed this segment of online investing with its Secondary Marketplace that claims the title as the “biggest marketplace for buyers and sellers of Europe’s hottest startups” (including 75 Fintechs currently).  Over the past several years, Seedrs Secondary Marketplace has iterated and grown thus providing a viable exit opportunity for private securities beyond the more traditional initial public offering or acquisition. Over time, this service will play a larger role in the future of Seedrs.

Recently, Crowdcube announced it will soon launch its own secondary trading platform. Long-anticipated, last month Crowdcube revealed the forthcoming launch of “Cubex“.

At that time, Crowdcube explained that gone are the days of only IPOs or acquisitions as a pathway for a successful exit. The platform pointed out that companies are staying private longer these days thus minimizing gains available for public investors. Crowdcube stated:

“Secondary sales are not new to us, we’ve arranged one-off secondary transactions for multiple companies in our portfolio. Since 2017, we have delivered over £16m in liquidity through secondary shares. Most notably, Revolut shareholders achieved 20x returns in 2018. Secondary sales are proving increasingly popular as our portfolio matures and the profile of business raising capital on the marketplace continues to evolve.”

Cubex has already been tested with a secondary sale for Freetrade, a transaction that reportedly delivered a 47X return for investors. Reports like this will help to engender investment crowdfunding as a sustainable (profitable) sector of Fintech.

 

 

Sponsored Links by DQ Promote


 

Send this to a friend