1. Main risks related to the issuer and to the offered investment instruments, specific to this offer
Before deciding to invest in the Notes issued by Spreds Finance, the Investor is invited to carefully examine the risk factors described hereinafter which, individually or as a whole, can have a significant influence on Spreds Finance and affect its ability to meet its obligations resulting from the issue of the Notes.
Every decision to invest in the Notes must be based on an exhaustive examination of the whole Information Note. Every Investor who is considering subscribing to the Notes must carry out its own analysis of the solvency, the business, the financial situation and the prospects of Spreds Finance and of CodeONE (pending incorporation). They do not offer any guarantee of future performance or principal repayment guarantee. The Investors must therefore understand and be aware of the fact that the proposed investment in Notes carries with it a risk of partial or total risk of the capital invested.
The attention of the reader is directed to the fact that the list of risks presented below is not, and does not intend to be, exhaustive and that it is based on the information known at the date of the Information Note. It must therefore be understood that other risks, which are unknown, improbable or whose occurrence is not considered as likely to have an unfavourable effect on Spreds Finance, its activities or its financial situation, may also exist.
1.1. Risks linked to Spreds Finance
Risk of insolvency of Spreds Finance
The impact of an insolvency of Spreds Finance on the noteholders is limited due to the protection afforded by the Law of 18 December 2016 organising the recognition and supervision of crowdfunding and laying down various financial provisions (the
Law of 18 December 2016). That law indeed provides that if a financing vehicle such as Spreds Finance invests in several issuer-entrepreneurs, each participation held in, or loan granted to, the same issuer-entrepreneur must be booked in a separate compartment in the vehicle's assets and must be subject to an appropriate accounting treatment, it being understood that the vehicle’s accounts shall be drafted per compartment. Any commitment and operation of the vehicle is, in respect of the counterparty, clearly allocated to one or more compartment. The counterparty shall be duly informed thereof. By way of derogation from Articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a given compartment are exclusively affected to the guarantee of the rights of the Investors relating to that compartment. This means that the inability of Spreds Finance to pay its debts (to the extent that they are not allocated to its compartments) shall have no effect on the rights of the Investors, as the underlying assets of the compartment on behalf of which the notes are issued shall serve only to pay the debts of Spreds Finance to the holders thereof.
However, in the absence of any court precedent relating to the insolvency of a compartmentalized financing vehicle such as Spreds Finance, should such insolvency occur (e.g. because the general costs not allocated to a compartment exceed Spreds Finance’s revenues), the noteholders may face the risk of incurring substantial delay in recovering their investment, even if the assets of the relevant compartment are sufficient to cover Spreds Finance’s liabilities towards them.
Risks linked to the amount of the expenses associated with the underlying assets
The risk linked to the fact that due to the 5% Subscription Fee (charged in addition to the Nominal Amount) and due to the Expenses related to the Underlying Assets borne by the Noteholders, the return of the Notes may be negative even if the Proceeds received by Spreds Finance in relation to the shares of CodeONE (pending incorporation) exceed the amount invested in CodeONE at the time of the issue of the Notes. The amount of the Expenses Relating to the Underlying Assets, which are not capped, is not determinable at this stage.
It must be noted however that most decisions to incur Expenses Relating to the Underlying Assets (as defined below), i.e. for all Expenses Relating to the Underlying Assets other than expenses imposed by law or relating to the tax treatment of the Underlying Assets, will be the subject of a general meeting of Noteholders, and such meeting will be held in accordance with article 28, §1, 1° of the Law of 18 December 2016. The approval by the Noteholders of Expenses Relating to the Underlying Assets may result in a situation where Noteholders will pay additional money to Spreds Finance to cover the pre-financing of such expenses.
1.2. Risks linked to CodeONE (pending incorporation) and the Underlying Asset
The risk linked to a lower value of the shares of CodeONE (pending incorporation)
In case of non realisation of the forecasts, there namely is a risk that the value of the shares of CodeONE (pending incorporation) will be lower than expected, leading to low returns, even nil or negative returns, for the Investors.
Risk linked to the insolvency of CodeONE (pending incorporation)
The attention of the Investors is directed towards the risk of insolvency of CodeONE (pending incorporation), whose shares are the Underlying Assets of the Notes, without guarantee of returns on the investment; generally speaking, the risks affecting the performance of CodeONE (pending incorporation) thus constitute indirectly the risks inherent to the Notes as well (for example, a bankruptcy of CodeONE (pending incorporation) would lead to the loss of all or part of the investment) so that the Investors bear a risk at the same time on Spreds Finance as Issuer, and on CodeONE (pending incorporation).
1.3. Risks linked to the Notes
The absence of a fixed return and of a predetermined date of reimbursement in cash
The date of reimbursement in cash depends in fact on the date at which Spreds Finance transfers the shares of CodeONE (pending incorporation) acquired thanks to the proceeds of the Notes, and the determination of this date is beyond the control of the Noteholders.
The risk that Spreds Finance does not find a purchaser for its participation in CodeONE (pending incorporation)
Investing in shares of young companies entails a risk that no purchaser will be found for these shares, or not at the right price, ensuring a market conform return, or not in a reasonable timing. Spreds Finance will try to obtain the best possible price on the basis of its competence but due to contractual or statutory restrictions on the transferability of the CodeONE (pending incorporation) Shares (a.o. a drag along right), Spreds Finance may be compelled to sell CodeONE (pending incorporation) shares at a time or at conditions which are not favourable to the Noteholders. Spreds Finance can therefore not guarantee that it will be able to act in the best interests of the Noteholders. The Noteholders are therefore not certain to recover the amount that they have invested. Any decision of Spreds Finance to sell any CodeONE (pending incorporation) shares shall be subject to the approval of Noteholders representing at least 75% of the ONESHAVE 1A Notes then outstanding, except if Spreds Finance is required to sell pursuant to a contractual or statutory provision (e.g., a drag-along clause in a shareholders’ agreement or in the articles of association of CodeONE (pending incorporation). In any case, if the Noteholders decide to sell CodeONE (pending incorporation) shares, it is not excluded that the Spreds Finance will postpone a part of the repayment of the Notes until the expiry of the period during which it may be held responsible to indemnify the assignee (purchaser) of the Underlying Assets according to warranty provisions agreed with the assignee (purchaser) of such Assets, or to pay any taxes relating to the (assignment of the) Underlying Assets. In such a case, the reimbursement may be postponed only to the extent of the maximal amount of these warranty obligations or taxes (or if these amounts are unknown, for a reasonable provision determined by Spreds Finance and intended to cover these possible obligations of Spreds Finance) and the reimbursement shall then be completed, as applicable, on the 7th business day after the expiry of the period during which Spreds Finance may be required to pay such obligations or taxes. During the warranty period, Spreds might be obliged to compensate the damage suffered by the purchaser because of a breach of the representations and warranties and therefore, the revenues for the Noteholders will be reduced.
Absence of diversification
To the extent that the Notes are linked to the performance of a single target company and to the extent that the obligations of Spreds Finance depend on the return obtained by Spreds Finance under its investments in this single target company, the Noteholders do not benefit from the protection afforded by an investment diversification policy.
Lack of liquidity
A noteholder may not find a purchaser for the Notes which he would like to sell or may not be able to sell its Notes at the expected price. The lack of liquidity of the Notes issued by Spreds Finance results from the fact that these (i) are not publicly quoted and (ii) do not have a fixed return and (iii) do not have a predetermined date of cash reimbursement. This risk is thus considerable and the attention of the Investors is directed to the risk of not being able to resell the Notes before the date of reimbursement, which, as explained above, is unknown. No liquidity is guaranteed and it is up to the Investor to find a buyer for his Notes on his own, as the case may be. Lastly, and due to the absence of any market to trade the Notes, there is no means to adequately determine a comparative pricing method for the Notes.