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Equity Crowdfunded Company on Brink of IPO?




By Ryan Weeks on 16th December 2015


A successfully funded Crowdcube company has closed a significant up-round.

 

easyProperty – the online estate agency that raised money through Crowdcube in 2014 – has secured a £25m equity investment. The money comes courtesy of a London-based hedge fund and a consortium of Angel investors. Chrystal Capital Partners brokered the deal, and a little digging would suggest that Toscafund Asset Management contributed a sizeable chunk of the money.

 

easyProperty raised a little over £1.35m via Crowdcube around a year ago. When the company closed this overfunded round, it carried a price tag of approximately £66.9m. The £25m fundraise values the company at £100m – representing a value uplift of roughly 49.5% over the past year.

 

The investment is an encouraging sign for the 376 investors that participated in the original Crowdcube round. easyProperty will have immediate access to £16m, with the remainder being held back for “accretive acquisition opportunities”. The total amount invested in easyProperty to date – a mixture of private, VC and crowdfunding money – now stands at £39.25m.

 

At the time of easyProperty’s Crowdcube round, an IPO was identified as the company’s preferred exit route, while the prospect of a trade sale was also mooted. The company then declared that an IPO could take place within 2 years of the Crowdcube raise, subject to market conditions. The Chrystal Capital update refers to the £16m portion of the £25m investment round as an “oversubscribed pre-IPO private placement”, which strongly suggests that a listing is on the cards.

 

Equity crowdfunding investments are fundamentally illiquid, and an uplift in the value of an investment does not necessarily increase the chances of that investment delivering returns to investors. But an IPO of course changes things, delivering both value and an exit route to investors.

 

However, the key question mark over the £25m round is this: to what extent have Crowdcube’s investors benefited from the jump in easyProperty’s valuation? The 376 Crowdcube investors hold Ordinary Shares, as opposed to any alternative class of share. In other words, it’s not unreasonable to suspect that they would have had a right to pre-emption in the £25m round. However, the wording of the Crowdcube announcement would suggest that participation came exclusively from an unnamed hedge fund and a gaggle of Angel investors. If Crowdcube’s investors did not participate in the £25m round, then questions abound as to what class of share was issued, to what extent the issue will dilute existing shareholders, and, crucially, what proportion of the 49.5% uplift in easyProperty’s valuation will be enjoyed by Crowdcube’s investors – if their shareholdings have indeed been diluted.

 

We’ve not yet been unable to obtain clarity on these issues, but we’ll keep you posted. In the meantime, it would appear that the UK’s equity crowdfunding sector is on the brink of delivering its first IPO.

 

UPDATE: We've received word from Crowdcube Co-Founder Luke Lang, who confirms that Crowdcube's investors will enjoy a significant uplift in the value of their investment even after the effects of dilution: 

 

“This latest investment round for easyProperty is great news for crowd investors and any impact of dilution, which is to be expected and not limited to crowdfunding, will be significantly outweighed by the increase in the value of their shares. During the company’s raise on Crowdcube, just over a year ago, its valuation was openly and widely discussed in the forum and so we feel this latest funding round, at a significantly higher valuation, has validated the sophistication of crowd investors.”

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