Risk warning

Unlisted growth companies are high-risk investments. Making a high-risk investment involves risks, for example the risk of losing your investment, lack of liquidity, irregular or rare dividends and dilution of your stake. Please study the following risk warning before making a high-risk investment.

It is recommended that you familiarize yourself with the investment target of your choice, reduce risks by investing in several investment targets and balance your investment portfolio with more liquid investments. We also advise you to pay attention to the Target Company specific risk descriptions, which you will find included in the pitch materials.

How to manage risks

Never invest more than what you are ready to lose!

Spread your risks by diversifying your investment portfolio! Investing through Invesdor is an excellent way to invest in unlisted growth companies, but in addition to this we recommend balancing your investment portfolio with lower risk investments. This way your portfolio is not dependent on the success of one growth company only.

Risks involved in Equity Crowdfunding

Consider that by subscribing shares of an unlisted growth company through Invesdor’s service, you will not necessarily get continuous returns on your investment. There are a few examples of significant risks involved in equity crowdfunding presented in the following:

Irregular or rare dividends. Especially in the beginning, it is not very likely for the Target Company to pay dividends. Paying of dividends depends on the results the Target Company is making, and companies in their early phase usually invest their profit in their growth.

Losing the invested capital. Please be aware, that the majority of startups fail and are not able to reach their goals as planned. It is likely that you will never get any returns on your investment and you lose the entire capital invested or a portion of it. If the Target Company fails, no-one will pay you back your investment, so never invest more than what you are ready to lose and spread your risks by diversifying your investment portfolio.

Poor liquidity. Liquidity refers to the ability to convert shares to money quickly. It is not always easy to convert the share subscribed by equity crowdfunding to money, partly because growth companies are rarely listed in an aftermarket. In co-operation with Privanet, Invesdor strives to increase the liquidity of Target Companies’ shares by enabling an aftermarket in Privanet’s Invesdor List, on which the Target Company can decide to become listed. As an investor you can affect this by asking the Target Company to list itself.

Dilution. Dilution refers to the decrease of an investor’s relative ownership in a company caused by the company issuing more shares. Many Target Companies will eventually organize a second funding round. Your stake in the company will be diluted unless you subscribe more shares in proportion to your existing stake. The shareholders’ agreements of some Target Companies involve a redemption clause, which prevents dilution. Please study the Target Company’s pitch material and Articles of Association to find out about a possible redemption clause and potential differences in share series.

Foreign exchange risk. Foreign exchange risk refers to the effect that movements in exchange rates can have on the value of your investment. When you invest in an offering organized in a currency other than your own, you are subject to foreign exchange risk. Furthermore, depending on your chosen payment method, your bank may charge a currency exchange fee according to their pricing.

Risks involved in Debt Crowdfunding

Bond investing differs from equity investing. The investor won’t become a shareholder in the target company and thus they usually won’t be able to profit from a possible increase in the valuation of the company. Instead the company will make interest payments every six months throughout the loan period and at the end of the period pays back the principal in full. Invesdor or any other party won’t in any situation be held responsible for the target company’s solvency, and the investor might lose the capital invested. As with unlisted shares, bonds, too, are high-risk investment products.

Losing the invested capital and interest. The target company might not be able to stay solvent throughout the loan period, which makes it possible that they won’t be able to pay the debt at the end of the period. Here the investor will in the worst case scenario act as a bankruptcy creditor and might not get the capital back in full. The target company might not be able to pay the interests either. The investor is responsible for their investment decisions and no one will compensate the possible losses caused by poorly performing investments.

Poor liquidity. Liquidity means the ability to convert the investment into cash. Bonds are by definition transferable. Invesdor intends to increase the liquidity of bonds through cooperation with Privanet by enabling an aftermarket at the Invesdor list in Privanet, where the target company can list themselves if they wish to do so. As an investor you can affect this by asking the target company to list their bonds. Even though an aftermarket exists this doesn’t mean that the investor necessarily will be able to transfer the bond to a new investor.

Unsecurity of the bonds. Bonds are typically unsecured. This means that if a company loses its solvency, no security is guarding the invested capital or the unpaid interest payments, and the investor might lose their investment. In case of insolvency secured debts and other preferential claims are served before the unsecured ones and unsecured bond holders are in a weak positon in the creditor’s order of preference.

Repayment risk. The target company can pay the borrowed capital back at any point in time before the end of the loan period and the investor cannot prevent this. However the investor is entitled to receive at least 75 % of the interest for the whole loan period.

Lending capital for the whole loan period. The investor has no other way to turn his investment into cash but to sell the bond forward. Redemption clauses relating to equity investing do not apply to bonds.

Interest risk. The interest rate for the loan is pre-agreed and changes in the general level of interest rates won’t have an effect on it.

Foreign exchange risk. Foreign exchange risk refers to the effect that movements in exchange rates can have on the value of your investment. When you invest in an offering organized in a currency other than your own, you are subject to foreign exchange risk. Furthermore, depending on your chosen payment method, your bank may charge a currency exchange fee according to their pricing.