Everything you should know about our secondary market solution
17. December 2020
Fundwise has recently started cooperation with Ignium, an Estonian company that enables a direct, affordable and reliable connection between companies and investors globally. Our partnership allows us to offer better and more comprehensive experience to our clients. Several of our most recent campaign organisers, e.g. Handies and Finest-Hall, are the first to use the new solution. In this blog post, we will take a more in-depth look at Fundwise-Ignium’s joint value proposition to our clients.
Around the globe, companies and investors are experiencing a critical lack of access to capital markets. There are two primary reasons for this: first, companies and investors must overcome often insurmountable compliance barriers imposed by a series of “gatekeepers”, which include banks, broker-dealers, and other institutions. Additionally, even when accepted by the gatekeepers, local and regional capital markets are fragmented: participants cannot gain direct access to one another. In a nutshell, Ignium has created immutable, reliable and hassle-free infrastructure for issuing and maintaining securities as well as settling sales and purchases of securities. This leads to a new paradigm of efficient capital market and asset management. Via Ignium, companies have access to a global pool of investors with a lower cost of raising capital and investors have intermediary-free access to a global pool of non-listed companies.
In the context of Fundwise’s crowdfunding campaigns, campaign organizers can freely issue shares to both residents and non-residents of Estonia. After the end of the campaign, securities get registered in the Ignium’s system and can further be traded on the Ignium’s secondary market. Investors do not need to open securities accounts through the banks, but can, instead register directly with Ignium and hold their assets without intermediaries.
Below there are more details on the main functions of Ignium.
1. Issuance of securities and maintenance of shareholders’ registry
Ignium provides companies with an easy way of issuing new digital securities and/or maintaining the registry of shareholders and securities*. The only prerequisite is the registration of the securities’ issuer, securities’ holders and investors in the Ignium’s system. The process takes some 2-3 minutes for natural persons and ca 20 minutes for legal persons. After the registration, both the issuer and securities’ holders can access their assets and view information easily through Ignium website. Securities are issued/maintained in a digital format, using secure blockchain technology, and they are 100% reconcilable with the information registered in the Commercial Register. Ignium is residence-agnostic, meaning that residents of any country can join the system. The existence of securities accounts or any other special investment/trading accounts is not necessary. Also, Ignium is security-type agnostic: shares, convertibles and potentially other securities can be issued and maintained in the system. Additionally, the functionality of issuing and maintaining employee options will soon be added. Lastly, but importantly, upon making the investment, the investors will hold shares of the investee company directly without any intermediate holding structures. Therefore, investors and issuers have the benefits of the new technology providing easy and global access and reliable infrastructure as well as the good elements of the existing system, where investors can be direct shareholders in the company.
2. Secondary market for securities and real-time settlement with zero intermediaries
All the registered users of Ignium can trade with their securities. They can post their sales and purchase announcements on a virtual information board and discuss all the details with interested buyers and sellers via a chat function. Once the agreement is reached, parties can move money within the system or make payments via other channels. Afterwards, both the buyer and the seller should confirm closing the deal in the Ignium’s system and the deal gets settled instantly. To communicate it to the Commercial Register, the results of the transaction will need to be sent to the register in a semi-automated manner. The fully automated solution will be implemented in the 2nd half of 2021 when the Commercial Register upgrades their APIs. If the payment is made within the system, the payer should first upload money to the digital wallet. The conversion is made on a 1:1 rate between fiat money and Ignium digital coins. Ignium coins are not tradeable and are only used for settling transactions taking place within the platform. Ignium users can easily withdraw money from Ignium. They simply convert their Ignium money into fiat money with a click of a button. The funds are sent from the investor’s Ignium user account to the user’s bank account; the corresponding digital coins are burned. Ignium is open to onboarding any applicants, thus enabling a borderless and active secondary market for a big number of securities’ issuers and holders.
We hope you will like our new solution and will use it. Should you have any further questions, do not hesitate to contact us: email@example.com
* Based on the Estonian legislation, non-listed companies are free to choose the registrar of their shareholders and securities. Companies can keep the register themselves or use services of some external providers. Also, companies have freedom to choose between notarized and non-notarized share sales and purchase deals. Up until August 2020, Nasdaq Central Securities Depository (NCSD) was the only possible alternative for the non-listed companies, which did not want to sell their shares via notaries. Starting from August 2020, due to some changes in the legislation, if companies have a nominal share capital in the amount of 10 000 euros or more and if they have refused from notarized transactions in their articles of association, they do not have to use NCSD to trade with their securities without involving notaries. To be able to register securities in NCSD, securities’ issuers and securities’ holders should open Estonian securities accounts. Maintenance of such accounts is not free of charge. For non-resident investors, it is nearly impossible to open these accounts.