Welcome crowd funding – goodbye stockmarkets

Some years ago I was trying to raise money for one of my companies. I came across some excellent advisors who encouraged me to list the company on OFEX, which is now called PLUS. It made perfect sense, so we moved ahead.

Part of the process was going to PLUS to be vetted. During the meeting, which quite frankly was rather boring, the CEO of PLUS walked in. We spoke for a few minutes and off he went.

What really surprised me was how impressed my advisors were. Apparently the CEO normally did not come in. I should feel honoured. I failed to understand. In my view I was there for at least 50% whether PLUS could offer me what I needed: a platform to raise money for my company.

A few weeks later, as it became clear that we were not raising the money, I called the CEO and I asked him for some help advice. “No can do” was the response. Again, I did not understand, but I pulled the listing and raised the money, with the help of the advisors from private sources.

Now why this story? What shocked me was the attitude of PLUS. They did not understand their function and it appears they still do not. There are now less than 170 companies listed.

Of the top 6 risers today, only one moved at all. Of the bottom 6, only one moved also. That is fairly hopeless. It means there is no trading, so the market is dying.

The attitude of PLUS, despite a change in CEO, has not changed. They still do not understand they are market, not a regulator. You have to regulate markets, but that does not change your prime objective. The regulations are there to ensure orderly trading.

At lunch in the City today the conversation was about the challenges for smaller companies to raise money, particularly equity. I am closely involved in this as I am involved in a cloud funding venture, which I hope to bring to the UK soon.

I will let you look up what cloud funding is (just click the link), but if the world moves the way I expect it to, markets (or these regulators as they see themselves) will disappear. Just like the trading floors which disappeared in many cases, the whole need for such markets will disappear. It is simply a question of time.

A lot of my friends involved with the stockmarkets, corporate finance advisors, brokers, etc, will howl at this blog, but in fact they need to open their eyes. The days of the markets being driven by the size of adviser fees  are going so perhaps time to put the Maserati on the block.

Oh, and the regulators then? Perhaps someone can send them a letter with a stamp explaining what crowd funding is and that it is coming to a place near them. As they have not figured out the past yet (a chappy at UBS has just outfoxed you once again, but only for $2 billion this time)  best they start figuring out how to deal with the future.

1 comment for “Welcome crowd funding – goodbye stockmarkets

  1. Richard Hoblyn
    23 September, 2011 at 08:54

    Great blog Dirk!

    The reason why Plus exists is because Ofex under Jenkins leadership was one market maker driven but ironically because it was only a facility it didn’t get regulatory approval from FSA which precluded anyone in the mainstream markets from entertaining any trading in Ofex stocks. When Plus took over the reins of Ofex there was an attempt to get various market making outfits to encourage trading in Plus stocks but guess what…the FSA still precluded anyone from speaking to their clients about this market (they called it a facility which is a bit of a joke too) owing to suitability (& the new rules are getting worse) as it wasn’t an Official market so the outcome has been that even the market makers have virtually given up. There are of course many corporate advisers and occasionally chunks of stock do change hands on a matched basis but always at the agency brokers risk which hardly seems fair. I’m afraid I agree with you that the FSA has alot to answer for in micro investing as even the Pink Sheets OTC market in US is better facilitated. Unfortunately as Tony implied on his blog the regulator is only concerned with preventing car crashes rather than building a motorway and road network so CROWDFUNDING or CROWDSOURCING could well be the future but it still doesn’t get around the liquidity issue. Attracting new money into new enterprises is all well and good but a secondary market must be made available to allow investors an easy exit. As always a jobber must provide a market making facility to provide the risk opportunity for both the buyer and seller. It remains to be seen whether the internet crowd can do this.

    Happy days!

    Richard.

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