How does my investment materialize?
Spreds offers equity and loan investment opportunities in a selection of target companies.
1. Investment opportunities: investments through Participatory Notes
Investors who invest through our platform generally do not become direct shareholders or lenders, they invest through a financial vehicle managed by Spreds (called Spreds Finance).
Spreds Finance issues a security that represents the investor's investment. This financial security is called a Participatory Note and can be linked to shares of a company (called an Equity-Linked Note) or to a loan to a company (called a Debt-Linked Note). The Particpatory Note is the economic mirror image of a share (equity interest) or loan of the underlying company (the company being financed) and entitles its owner to the same return (capital gains in the case of shares or interest in the case of loans) on a pass-through basis, which means that Spreds Finance is obligated to pay the investors holding the Participatory Notes the proceeds of the underlying investment paid to Spreds Finance.
The main advantage of this system is that, in most cases, shares or loans in private companies are illiquid (meaning that investors cannot sell them) and often not divisible (meaning that investors must invest in multiples of a large amount, for example 100,000 euros). With Participatory Notes, investors can invest smaller amounts and they can (if they find a buyer) sell their Participatory Notes.
Investing through Participatory Notes means that investors are grouped together. By acting collectively, they have a stronger voice and do not need to be burdened with the administrative and legal tasks associated with private equity investments.
Investing through Participatory Notes means that Spreds, as manager of Spreds Finance, will manage the corporate actions related to the underlying assets until the end of the investment, such as issuing Tax Shelter attestations, attending general meetings, paying interest on loans, collecting reports or organizing decisions to be made by investors. The voting rights attached to the underlying investment are exercised collectively by all investors in that investment and are then ultimately exercised by Spreds Finance on their behalf.
Spreds Finance is a dedicated financial vehicle whose sole activity is to hold investments or stakes in companies, with one compartment for each fundraising.
The particular structure of Spreds Finance ensures that each compartment is isolated from the others. This means that if one company has financial difficulties, it does not impact the other investments. In addition, each compartment is fiscally transparent, which means that there is no additional taxation on capital gains or interest.
2. Investment opportunities: direct investors
Some of the opportunities offered on Spreds.com allow investors to become direct shareholders or lenders in a company. In this case, no Spreds Finance compartment is used and investors hold shares or loans in the selected companies directly, which means they will have to manage them themselves. Spreds always clearly indicates when an investment is made through Participatory Notes or directly in the company.
3. What happens if a company is listed on the stock exchange?
If, at some point in the evolution of a company, its shares (or debt securities) are to be listed, these shares (or debt securities) become liquid and divisible. Spreds Finance will therefore convert the Participatory Notes held by the investors into shares (or debt securities) of that company and transfer them to their securities account, thus allowing the investors to trade their assets on the stock exchange and exercise their voting rights themselves.
4. Spreds' selection process
The selection process of Spreds is as follows:
The application phase begins once a project owner decides to submit an application to Spreds' New Client Acceptance Committee (NCAC), which is responsible for evaluating the absence of "red flags" that would prevent Spreds from supporting a project owner's fundraising. To this end, it is important for the NCAC to ensure that it has sufficient information to make a reasoned decision.
The application phase is conducted in two stages.
In the first step, project applicants that do not a priori meet the requirements for further cooperation with Spreds are filtered out. The following projects will be excluded by default, but some exceptions can be made:
- Project owners who are not ready to raise at least 50.000 Euro;
- Project owners with a criminal record in the field of anti-money laundering;
- Project owners established in a non-cooperative jurisdiction, as recognized by the relevant EU policy, or in a high-risk third country in accordance with Article 9(2) of Directive (EU) 2015/849.
In the second step, the project owner provides representations and warranties, which means that it is liable for any misleading and/or incorrect information to Spreds and investors in case of damages.
The NCAC, based on this information, decides whether or not Spreds will sign a contract with the project owner.
5. Selection criteria for investors
Spreds offers investors an easy way to evaluate investment opportunities through a fact sheet that appears on every campaign profile.
6. Equity fact sheet
You can find more information about the fact sheet in the relevant FAQ: "What is the fact sheet?".
7. Filtered investments
Members of the Spreds platform will be able to filter companies according to different criteria, allowing them to clearly see which opportunity matches their interests.
8. Tracer Investments
You can find more information about the tracers in the dedicated FAQ topic.
9. The risk of start-up failure
Statistics show that 40-50% of start-ups fail, which means a total loss for the investor, 40% survive generating a small loss or return, while the remaining 10-20% succeed - i.e. they are bought out or go public - and generate a capital gain that represents a multiple of at least 3 times the initial investment.
10. Issuance of the key investment information sheet
11. Spreds Finance: Tax Shelter management
You can find more information about the Tax Shelter in the dedicated FAQ topic.