By Shavasb Bohdjalian
Certified Investment Advisor and CEO, Eurivex Ltd.
High growth companies or existing companies that wish to expand their operations, are most likely to be in need of funding assistance. Previously, such companies would raise the necessary funds from the banks, but in view of a reluctance to lend or because of the banks’ policy of high lending fees, many companies have decided to approach investors and raise funds directly.
The two most popular methods of raising funds are: Share listing; and, Bond offering.
Companies may issue shares or bonds directly to investors, but the more efficient method is to go through a recognised stock exchange and list the shares or bonds on such an exchange through which investors will have easier access to the financial instruments, enjoy security of transaction and be in a position to secure additional information on the issuer.
Listing financial instruments (shares or bonds) on a recognised stock market is, however, one part of the transaction. The other part is raising the funds from investors. Many CEOs or company presidents believe that by simply listing their shares or bonds on a particular market, investors will rush and snap up their issues and they will reach their fund raising targets. Unfortunately, that is not the case.
A company needs to market itself and attract attention and interest in a very crowded and competitive environment where companies from all jurisdictions are competing for funds.
Well established companies with a solid reputation and strong balance sheet usually turn to multinational banks to assume responsibility for both their listing and fund raising, but subject to having the ability to pay millions in fees to the investment bankers.
Small to medium sized companies that cannot pay such a high cost may turn to more affordable solutions such as finding an investment firm which will guide them through the listing and funding companies that may provide funds and or use the direct approach of using a listing on a recognised stock exchange to approach investors directly.
Eurivex is a regulated investment firm specialising in guiding companies to successfully list their shares or bonds on recognised EU exchanges such as Cyprus and cooperates closely with specialist funding sources in arranging for funding for companies that utilise the listing services of Eurivex.
Working closely with the clients, Eurivex identifies the funding needs of the clients and then makes the introduction to the funding sources which include major European global banks, private equity and venture capital, as well as institutional funds.
The success of the fundraising will, however, depend on the following:
- Quality of the issuer;
- History and industry it is involved in;
- Track record, profitability and balance sheet size;
- Contribution of the existing owners into the project;
- Where and how proceeds of the funds will be used;
- What is the return objective;
- The management team and members of the board;
- Contingency plans in the event of adverse market conditions.
Some of the funding sources with which Eurivex cooperates charge a monthly retainer in addition to a success fee, while others only apply a success fee.
Eurivex does not cooperate with funding sources which demand an introduction fee or other gimmicks, the objective of which is to secure cash up-front from the borrower before delivering the funding.
The majority of funding sources apply their own rules of how companies can qualify.
One of the most effective and cost-efficient methods to keep interest on a stock at high levels and attract investor attention and funds is the use of social media networking, as well as traditional media outlets through which a company can remind investors of how it is achieving and surpassing its goals and delivering outstanding results.
Another approach is to establish a regulated investment fund to raise funds the objective of which is to invest in a particular business.
In Cyprus, such regulated private funds are known as International Collective Investment Schemes (ICIS), which at the moment are supervised by the Central Bank of Cyprus. The legal basis of an ICIS is a limited liability company but with variable capital. When there is demand from investors, it will issue shares or units directly to investors without going through the Registrar of Companies and when investors exit, the shares or units are canceled. The entry/exit is based on latest Net Asset Value (NAV) according to the terms and conditions stipulated in the Private Offering Memorandum. An ICIS can sell its shares/units to maximum 100 investors, classified as professional under MiFID rules and each with minimum EUR 50,000 investment. There are more than 100 such funds operating under the supervision of the Central Bank of Cyprus.
(Eurivex Ltd. is a Cyprus Investment Firm, authorized and regulated by CySEC, license #114/10. Eurivex is also approved to act as Nominated Advisor for listings on the Emerging Companies Market of the Cyprus Stock Exchange and approved to act as Listing Agent on behalf of Issuers wishing to list their securities on the Vienna Stock Exchange. Eurivex offers complete packages and solutions for all types of listings including structuring assistance. The views expressed above are personal and do not bind the company and are subject to change without notice.)
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