(14-03-2016, 04:25 PM)vesfreq Wrote: [ -> ] (07-03-2016, 05:28 PM)koh_52 Wrote: [ -> ]Aiyo crowd funding is the modified version of 'ton-tin chit fund model' of which long ago been started by China and cases of the founder run away with the money.
For MoolahSense, you bit for the interest rate, the lower u bit the better chance u get it, if its a popular company wanted to borrow money, like the recent a Mobile scooter company closed at 13% p.a.
But usually not popular company the allocation is 'first-come-first served' basis like the coming a manufacturer of elastomer seals. Target to loan 200k, offering 19% p.a. on 12 mths equal installment.
You may apply to be their member, go into their website and you will notice some companies (e.g. a mobile related co) every month loans 150k - 200k from this scheme and becos of the lucrative commission (3k -5k) per application they will just approve it and pass the risk to the greedy investors.
Take upfront money return interest to investors, like using many credit cards scenario.
To me, its a 'Ponzi' scheme, capitalize on human weakness that is 'greedy' wow 19% p.a where on earth u can find this return.
The borrowers will keep on coming to this place to take easy money, one day if you don't approve my loan , I no money pay you and I will default...run road or declare bankrupt.
As for China case, the founder using 'Gemini Chit Fund' method, create all the fictitious hollow companies all money go to actually one person, then run-road.
Well, its only my personal opinion.
You have a point.
I received this cold call recently. And, there is this bond offering 12% coupon. It sounded very attractive. And, it is issued by an agricultural company.
Like any other investments we come across, its always important to question how the issuer is going to fund the repayment. Are there material risks in how they can eventually pay?
At 19%, why not use personal credit? Think banks charge low rates for personal credit.
Piecing all these pieces of the puzzles together, the average retail investor is always faces overwhelming odds against him. There is too much information asymmetry and that it is also difficult to depend on SGX to act as policeman, when they really have no track record in acting as a policeman in the financial markets.
A very good reminder is that there is no free lunch. Investment takes up a lot of faith in the unknown and being able to act rationally to all available and (even) almost unavailable information. Failing to exercise common sense is a common mistake in many. One good example is the one which I mentioned above. If someone promises you 19%, then its important to pop the question "how are you guys going to pay up?"
I can't comment on the 12% coupon offer as I don't know the financial structure. All financial vehicles are subject to abuse.
Personal credit is not relevant if it's a start up (maybe a real small, young company). Personal credit is based on how much the owner can earn. Even if the owner earns 10k a month, the personal loan the owner could get is only 40-100k, at , yes, a lower interest rate. Without sufficient money to fulfill the requirement, the money spent is a waste - for example, do a 10,000 SGD advertising "campaign" with media corp.
I think crowd funding provides a new avenue for fund raising. Do remember that for every increase in return, there's an even higher increase in risk.
What I don't understand is the full subscription within minutes. Do the subscribers read all the documents or even know what business are doing going in? Or because it's 100, 1000? How much effort, due diligence is done?
In startups selling cloths, students are taught to sell their cloths at lower price so that if the size doesn't fit, the buyer would be too lazy to request for an exchange. For example, a $10 skirts - buyer might complain online if the size/quality is not right; but if the skirt is $50, you will start getting requests to exchange that skirt. In crowd funding, if it turns out to be a ponzi, how many people would complain for their $100? To me the most dangerous part is this lack of due diligence - end up as crowd scamming - bottom of the pyramid kind of target for ponzi scammer.
In fund raising for start-up, series A (selling a concept, sometimes with no clear biz model or prototype) of funding gives the seed investor/angel investor insane amount of sweetener; but it's also most risky. In series B of fund raising, the company achieved some critical mile stones - but the a part of the money rise in B series would be used to paid the series A investors, for example, a 10% return p.a.; non dilutive preference share. And the series C, D.... all could be used to pay of the previous rounds. With each series, the risk is lowered and each equity sells at a higher price.
And finally, IPO - the exit for Series A, B, C... Proceed from IPO funding would be used to pay off all the previous obligation/redeem preference share etc.
Does this sound like a ponzi scheme?
Uber has 15 rounds of funding and I still think it sounds like a ponzi to me
. But if Uber really goes IPO, all these 15 rounds of early investors would get at least a few times. The earliest 2 investors would probably gets 100x or more? What percentage does this seed funding of 200k gets from a total valuation of 50B upwards? Uber gets about 10+B from funding. So even the late-comers in pre-ipo will probably get 1-2 x.
https://www.crunchbase.com/organization/...ing-rounds
And, not related, below is the strategy that I use now; although not the most extreme on either end of the barbell. Maybe buddies can think about it if you really get into those high risk, unregulated arena.
http://www.investopedia.com/terms/b/barbell.asp