The reasoning is that it’s the standard financial approach to give existing investors first dibs when a company is diluting its shares with additional investment, so that they can maintain their original stake in the business.
At the end of the day if you had an orange and someone came along and said they were going to take a couple of segments but don’t worry, the remaining segments are worth more, you understandably might be a little peeved.
I know the analogy is a little stretched when it comes to something that is essentially virtual, like a share holding, and it does seem irrelevant with a highly speculative, high growth stock like Monzo but try to think of it in wider terms… if you owned 25% of a company and significant voting power and the other shareholders decided to dilute the shares and also that they would be the ones with the opportunity to buy them then you essentially lose your control over the company.
Whilst we only have small shareholdings, it’s understandable that someone who bought 0.0033% of a company expected to receive 0.0033% of the voting rights and 0.0033% of the dividend pot and they’re not going to be too happy to find out they suddenly only have 0.0023%.
As Tom’s pointed out elsewhere, Crowdcube don’t currently support pre-emption (although they hope to in time for next year) so the £1,000 cap is a bit arbitrary (albeit good for someone like me who bought £400 in the first round but will go in with the full £1,000 this time).
The real problem (if you perceive there to be one) is the limited amount of the new raise that is being offered to ordinary people through crowdfunding. Monzo are raising £22.5m, of which only 11% is being offered to ordinary people. There’s nothing intrinsically wrong with that but Monzo could have raised that entire amount through the crowd if they’d offered out the full pot without the £1,000 cap and then everyone could have had a good share.
The reason for not doing this is presumably because crowdfunding is more expensive than regular funding (along, I’m sure, with some other reasons). A commercial decision though has been reached that they’d rather have the money cheaper and easier than to involve more people. I’m not criticising this decision, running the company is up to Tom and the board, but it seems likely that that’s the reality of it.
The only way to solve this problem so that lots of people aren’t horribly disappointed is to up the amount offered from £2.5m. Let’s be honest though, part of the reason for the offering is the PR around it. Selling out in 90 seconds, ballot processes, etc. all gain the company traction and create headlines.