Should one make risky investments
Unlisted growth companies are high risk investments. A high risk investment involves risks, such as: B. the risk of losing your investment, lack of liquidity, irregular or low dividends and dilution of your stake. Please read the following risk warning before making any high risk investment.
It is recommended that you familiarize yourself with the investment objective of your choice, reduce risks by investing in multiple investment objectives (= diversify) and balance your investment portfolio with liquid investments. We also recommend that you refer to the target company's specific risk descriptions contained in the pitch materials.
How to deal with risks
Never invest more than what you are ready to lose!
Spread your risks by diversifying your investment portfolio! Investing through Invesdor is a great way to invest in unlisted growth companies. We also recommend balancing your investment portfolio with lower risk investments. That way, your portfolio doesn't just depend on the success of a growth company.
Risks Associated with Equity Crowdfunding
Keep in mind that by subscribing to shares in an unlisted growth company through Invesdor's services, you will not necessarily get a continuous return on your investment. The following are some examples of significant risks associated with equity crowdfunding:
Irregular or infrequent dividends. Especially at an early stage, it is unlikely that you will receive any dividends on your investment. The payment of dividends depends on the results that the target company is getting, and early stage companies typically invest their profits in their growth.
Lose the invested capital. Please note that most startups fail and cannot achieve their goals as planned. It is likely that you will never get any return on your investment and lose all or part of the capital invested. If the target company defaults, 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.
Bad liquidity. Liquidity refers to the ability to convert stocks into money quickly. It is not always easy to convert the stock subscribed through stock crowdfunding into cash, also because growth companies are rarely listed in a secondary market. The shares of some of the companies issuing from Invesdor will be tradable on secondary markets at a later date.
Dilution. Dilution refers to the decrease in an investor's percentage of ownership in a company caused by the company's issuance of more shares. Many target companies will eventually initiate a second round of funding. Your stake in the company will be diluted unless you subscribe for more shares in proportion to your existing stake. The shareholder agreements of some target companies contain a withdrawal clause that prevents dilution. Please read the pitch material and the articles of association of the target company for information on a possible withdrawal clause and possible differences in the stock series.
Exchange rate risk. Exchange rate risk refers to the effect that exchange rate fluctuations can have on the value of your investment. If you invest in an offer that is organized in a currency other than your own, you are exposed to an exchange rate risk. In addition, depending on the payment method you choose, your bank may charge an exchange rate fee based on their pricing.
Risks Associated with Crowdfunding
Bond investments are different from equity investments. The investor does not become a shareholder in the target company and can therefore usually not benefit from a possible increase in the company's valuation. Instead, the company makes periodic interest payments throughout the loan term and repays the principal in full at the end of the term. The investor or a third party cannot be held responsible for the solvency of the target company in any situation and the investor can lose the capital invested. As with stocks that cannot be traded on the stock exchange, bonds are also risky investment products.
Loss of invested capital and interest.The target company may not be able to remain solvent throughout the loan term, making it impossible for it to be unable to pay the debt at the end of the term. In the worst case scenario, the investor will appear as a bankruptcy creditor and may not get the capital back in full. The target company may also not be able to pay the interest. The investor is responsible for his investment decisions and no one will compensate for the possible losses caused by investments with poor performance.
Bad liquidity.Liquidity means the ability to convert the investment into cash. Bonds are transferable by definition. Invesdor intends to increase the liquidity of some bonds by working with operators of secondary market platforms. Even if there is a secondary market, that does not necessarily mean that the investor can transfer the bond to a new investor.
Bonds uncertainty.Bonds are usually unsecured. This means that if a company loses its solvency, there is no security protecting the capital invested or unpaid interest payments and the investor may lose their investment. In the event of bankruptcy, secured debts and other preferential claims are settled before unsecured ones. Unsecured bondholders are therefore in a weak position.
Repayment risk.The target company can repay the borrowed capital at any time before the due date expires, if this is possible due to the type of product and permitted by law.
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