As a grown-up… I want to be listed on the MAB.
We get a lot of questions from investors about their possible disbursements in projects on our platform: how am I going to get a return on my investment? We have already dealt with this topic in a previous newsletter (How do I obtain profitability with my investments in Equity Crowdfunding?).
There are two ways to monetize the investment in startup equity:
- Dividend Collection. We always force to establish a minimum dividend distribution, even when many companies do not initially generate sufficient profits to enable this distribution.
- Exit or Divestment. When we talk about Exit or Divestment, we are talking about the possibility that the shareholder/investor can obtain profitability by selling his participation. There are several ways for the investor to be able to sell his shareholding:
- Sale of the company to a large fund – Venture.
- Sale of the company to a Corporate or Multinational.
- Purchase or merger with another large company.
- Liquidity in a secondary market.
- Listing on an organized market.
The Alternative Stock Market
This article focuses on the listing of new companies on the Mercado Alternativo Bursátil “MAB” (Alternative Stock Market).
The MAB is a relatively “new” market focused on small companies with projects in expansion, innovative and that can have high growth in a few years. However, the “youth” of the companies that join the MAB brings with it a negative aspect. In the short/medium term there are a number of factors that can affect their development and can generate uncertainties in their future economic-financial evolution.
And why doesn’t a startup and/or SME traditionally consider going public on the MAB as a way of incorporating new investors and becoming more professional?
Lack of knowledge, high exit costs, lack of prospects and long-term focus, lack of a sufficient mass of potential investors… Each SME and/or startup will have its own considerations, but the truth is that the MAB does not seem to be among their possible objectives.
Effects to be considered in the incorporation of a company to the MAB
- Companies are facing a great opportunity to finance their growth with access to new investors. However, this opportunity also entails a great responsibility for the company: it is exposed to the view of the entire financial universe and must therefore carry out an exercise of rigor and “good practices” whose ultimate aim is to ensure its total transparency.
- Companies must be able to generate realistic, coherent and non-voluntary Business Plans. Often, as companies grow, they produce business plans that may be unrealistic and more focused on satisfying the vision of potential investors than on reflecting the true reality of their business model. With the incorporation to an organized market, the company moves from voluntarism to reality.
- All the information of the companies is verified (legal due diligence, financial due diligence, MAB incorporation document, …) by different external agents (registered advisor, lawyers, auditors, CNMV, …) which forces an exercise of professionalism and transparency in all the processes of the company.
Unfortunately the MAB still has too much “bad press” which prevents it, in my opinion, from being able to develop the potential it undoubtedly has.
Part of this bad press stems from some cases of companies that generated large losses for their investors (GOWEX or ZINKIA), as a result of false information provided to them.
The MAB has tried to solve these problems with greater rigor and thoroughness in the information that companies must provide in order to access this market. As well as greater control of the data that companies must send to their investors.
Aspects to be solved for the development of the MAB
- The support of the Public Administrations. The public authorities should support alternative markets, and more specifically the MAB, as a way of financing the country’s business growth. Tax incentives should not be an end in themselves for companies listed on the MAB, but should be an added factor that makes investments more attractive.
- Growth in the number of potential retail investors. The MAB should not be considered in any case as a market for speculators or a market for “trading on rumors”. The MAB needs retail and professional investors in the medium and long term, and that accompany the growth of the companies.
- The attention and monitoring of institutional investors. Unfortunately, there are still few institutional investors who make the effort to analyze and understand the value propositions of the companies listed on the MAB. Likewise, many Securities Agencies and Managers have chosen not to invest in the MAB to avoid the “risk” of analyzing and selecting “the risk of the chaff”, which is not insignificant given the characteristics of the type of companies that are listed and/or may be listed on the MAB.
Fellow Funders’ opinion
At Fellow Funders we believe that the MAB is a good instrument for the economic development of Spain, making SMEs and startups visible and enabling access to investment. It is essential, however, that investors, companies and the Administration support this market. This would increase its attractiveness, like the markets around us (the AIM in the United Kingdom, the NOUVEAU MARCHE in France or the NEUER MARKT in Germany).
The alternative would be for growing companies to be acquired by Venture Capital or Corporate, seek other sources of funding outside our borders or resort to the always reviled bank financing.
At Fellow Funders we want to count on your help. Regardless of your age, we believe that we can create an ecosystem that allows us to generate investment opportunities by supporting the development of the entrepreneurial ecosystem in Spain. When the companies are sufficiently prepared we can provide liquidity to initial investors by listing these companies on an organized market such as the MAB.
Do you want to help us achieve our goals? do you want to join the Fellow Funders world? We are waiting for you!