EDIT: Moved to the Litecoin forum.Since the cryptostocks space is booming rather at present with ever-increasing trade volumes but a dearth of diversity in terms of the securities available, I have been wondering if I should use it for my main business.
I cannot reveal too much, but I am in the process of setting
Memset on a trajectory towards IPO on AIM or NASDAQ. To that end we are likely going to end a decade-long refusal to dilute and sell some equity to an investor such as the UK's Business Growth Fund. However, that is a painstaking and expensive process compared to the ease with which funds can be raised here.
I would therefore value your collective thoughts on the following: a convertible bond backed by real Memset shares which would receive a proportional share of dividends, but in the near-term would convey no rights (they would not be real shares). However, on floatation on a real-world public exchange those bonds would be converted into real shares. I think in practice I would make the backing shares my own, so that the bond were in effect a personal contract between me and the bondholder on the above basis. Having the virtual contract with the company directly could cause legal complications. The funds would however be put into Memset as growth capital.
Obviously there are many details missing here, but I'm more interested in a view on the viability and likely popularity of such an offering. The security would be hard-linked to fiat of course, which might make it undesirable, but the potential upside could be very large; Memset's larger competitors are commanding 6-7 times
revenue multiples, never mind EBITDA multiples, and we'd likely be offering the bond at a much lower multiple. The bond's yield would be relatively unexciting on that basis, perhaps 2-3% (we make much more profit than that but leave most of it in the business - we're about growth, not a lifestyle business).
An alternative approach would be to treat the bond more like a fixed-interest preference share or loan in which case the yield might be more like 7-8%, though that would lack the potential upside of dividend growth in future should the profits start to get very large (which according to my plan, they will).
Any views on how this might be regarded under UK law would also be appreciated. I am of course taking advice from my usual advisors, but they are shooting in the dark to a large extent. My biggest concern is that I'd end up making a massive income tax or capital gains tax bill, although in the case of the latter I do get entrepreneur's relief which would cover it I think. Thoughts welcome!
Kate.
