Capital at risk

The following is a brief summary of the risks involved in investing through the TokenMarket Technologies Limited crowdfunding platform ("Platform") and some ways in which you should manage that risk. Please consider also the full section headed "Risk Factors."

Diversification

You can reduce your overall risk by investing your money across a range of investments of different classes and categories with different risk profiles albeit this will not reduce your risk profile to zero. You should only invest part of your total funds through the Platform with some of your funds being invested in more secure liquid investments. A balance of investments is key to diversification.

Equity bonds or funds

Investing in the equity of early stage companies seldom yields dividends whereas a bond does pay interest. However, both involve a potential risk of loss of capital if the issuer fails.

Funds enable you to diversify your risk across a number of investments, but the underlying investments are clearly still at risk of failure.

Further specific risks are set out on the investment-specific page on the Platform.

Specific risks for any equity investments include:
  • Start-up businesses frequently fail or do not achieve the growth they planned and therefore investing in them is a significant risk. The risk that you will lose all or part of your investment is high. You should therefore only invest capital that you can afford to lose. As mentioned above, building a diversified portfolio of investments is key to managing your risk sensibly and increases your risk of returns. If a business you invest in fails, no-one will pay back your investment and your capital will be lost.

  • Tax reliefs which may be referred to in relation to an investment cannot be guaranteed and may also be lost due to your circumstances or those of the investee company.

  • Your ability to sell your investments after you invest through the Platform will be very limited. In other words, there is likely to be very limited liquidity and the investments are rarely listed on a secondary trading market, such as AIM, Plus or the London Stock Exchange.

  • Some investment shares available through the Platform may be non-voting shares which may be unattractive to potential buyers.

  • Most of the investments available through the Platform will be start-ups or early stage companies, which rarely pay dividends to their investors as typically these companies seek to re-invest profits to grow their businesses. Companies have no obligation to pay dividends.

  • Investments made through the Platform may be subject to dilution. This occurs when a company issues further rounds of shares in future without allowing existing shareholders to participate thereby reducing their overall proportionate shareholding. It is important to check the constitutional documents of any company you invest in to see if the class of shares you invest in have a right to avoid dilution by participating in future issues by the issuer (so called "pre-emption rights"). Dilution has an effect on voting, dividends and value. It is important to note that some shares or classes of share may benefit from pre-emption rights whereas others may not.

Specific risks when investing in Mini-bonds include
  • Investing in a bond does not give you a stake in the underlying issuing company. It is a debt instrument which gives you the right to interest payments and a return of your principal at the end of the term. It is important to read the investment documents as these will contain the exact terms applicable to each bond issue

  • Issuers are solely responsible for their own financial status and their ability to pay the interest and principal on the bonds when they mature. No-one, in particular Tokenmarket Technologies Limited or the issuer, gurantees that interest or capital.

  • To emphasise the above point, if the issuer fails, which is high risk with start-up or early stage companies which are likely to be those on the Platform, tneither the interest or the principal payable on the bonds will be paid. You should therefore only invest an amount that you are willing to lose and should build a diversified portfolio to spread risk.

  • To emphasise the above, mini-bonds are not insured by a third party nor are they protected by any governmental authority such as the Financial Services Compensation Scheme. This means that if the Issuer becomes insolvent, you could lose some or all of your money.

  • Mini bonds may or may not be transferrable. You will need to check the terms and conditions to see if they are. However, generally they will not be listed on any formal investment exchange or secondary trading market such as the LSE ORB. Accordingly, it may be difficult, if not impossible to find a buyer to purchase them. In general terms, mini-bonds should be seen as a long term and illiquid investment.

  • The terms of the bonds are very important, particularly as regards redemption rights and the terms for redeeming your capital. Typically, your capital will be locked up for the term of the bond which is typically 3-5 years.

  • Mini bonds are typically unsecured meaning that there is no asset backing securing their repayment (such as a charge over real estate) unless otherwise set out in the Bond Instrument. The implications of this are that This means that if an Issuer fails, it is unlikely that an investor will have their initial investment or outstanding interest payments returned to them

  • Generally speaking the Issuer of mini-bonds retains the right to redeem them early. This means that your investment and rate return may be materially curtailed because of this.

  • If an Issuer fails (ie goes out of business) it is unlikely that mini bond holders will get any return because mini bonds typically rank behind most other creditors including fixed charge holders, administrators, employees who are owed wages, banks, and secured debtors

  • Interest on mini bonds is typically paid at a fixed rate. This means if interest rates rise you may lose out and inflation may reduce the real value of the returns over time