Pre-emption rights typically allow investors to invest additional funds in each future round of investment, in order to maintain their original pro-rata share of the company (ie, not be diluted).
The issue with applying this to Crowdcube shareholders is that there are 1,800 investors, each of whom invested somewhere between £10 and £1000. The administration and cost involved in collecting the precise pro-rata investment to offset dilution of each person is prohibitively high. We’re working with Crowdcube to try to put in place a more automated solution by next year, when I hope we’ll be able to offer formal pre-emption rights.
Instead, what we’re doing in this round is offering existing investors the right to invest anywhere between £10 and £1000, so each investor can at least maintain their investment percentage and avoid dilution, or potentially even increase their holding if they wish. While we’re not using the pre-emption mechanic here, there’s the same economic effect.
There may be some confusion here. You can only ever maintain your participation by investing again.
For reference, shares in the crowdfunding round were priced at £0.5133. Those shares are valued at £1.0058 in this round. By my calculation, a £1,000 investment last year would buy a 0.0033% share the company. Those same shares are now worth £1,959.48 and represent 0.0023% of the company after dilution. If you wanted to purchase another 0.001% of the company to take your shareholding back up to the original percentage, you should invest £870 in this round.
Likewise, if you invested £100 originally, an £87 pound investment would protect your initial percentage shareholding.
I was a Crowdcube investor personally in the last round. Like all other Crowdcube investors, I’ll look at this round now and figure out if it’s a good investment for me or not. What’s my appetite for risk? Do I have £870 spare? How would I feel if I potentially lost it all? Do I have better opportunities to invest £870 somewhere else? Can I afford to lock away £870 and potentially not have access to it for 7 or 10 years? To me personally, maintaining a precise percentage shareholding is much less important than making a sensible investment decision.
Practically every member of staff at Monzo is a shareholder (or options-holder). We come to work every day because we’ve got the chance to build a bank that can positively impact the lives of millions of people. We want to leave the world in a better state than we found it. And, to reward the huge amount of support provided by investors and staff, hopefully we can make a decent financial return in the long-run.
I hope that makes sense? I’m more than happy to answer questions you have.
Thank you for your support so far ️