In an IPO, the risks and investment period are shorter, but the allocation that an investor can get is good if it reaches 10%. Recently, we have seen a downward trend in allocation, especially for top IPOs. In Pre-IPO deals, the investor can place the entire amount in full. The growth of the value of technology companies in the year before going public is on average significantly higher than in the next 12 months after the IPO.
We invest in technology companies with high capitalization growth potential a year or a year and a half before they go public. Basically, these are American and Israeli projects, sometimes European ones. After the public offering, the fund sells shares on the stock exchange and distributes the profits among the shareholders.
The price of shares after the public offering may turn out to be lower than the price at which the paper was purchased on the OTC market, and there is also a possibility that the company will postpone its listing and investors’ money will be frozen for some time.
We carefully select deals – our analysts find technology companies that have the potential to multiply their capitalization and the highest probability of going public within 12 months. Moreover, we only choosing companies in which the world’s largest venture capital funds have already invested. Thus, we check our own conclusions with the opinion of market leaders.Investors are recommended to form a portfolio of shares of at least 10-15 companies in order to reduce the overall risk.
In addition, by the end of 2022, we are launching a secondary trading (OTC) platform so that investors can sell their assets without waiting for an IPO.
A year before going public, the capitalization of Pre-IPO companies can grow several times. According to the experrience of our transactions, capitalization can grow from 50 to 700%, and we estimate the potential for the return of the fund’s strategy at 150% per annum.
The planned investment period is 10-18 months.
Usually, Pre-IPO deals have a lock-up period of 6 months from the date of listing on the exchange, although there are companies in which there is no such restriction. During a lockup, an investor cannot sell his shares. At the same time, it is possible to fix a position during a lockup by purchasing options. Such options usually appear within a month after the public offering.
The criteria for selecting Pre-IPO companies are quite strict:
These are the main but not the full list of criteria.
We’re living in an age of global digitization of the processes surrounding a person, therefore, the highest growth potential is contained in the high-tech segment.
A global correction or a global financial crisis will affect everyone and everything when it happens. The investment period may increase for our deals. Some decrease in profitability is also possible. We select companies with a sustainable business model, whose growth is associated with fundamental processes. For example, the markets for business process automation or computer game development will grow rapidly despite stock market fluctuations. During the crisis, if the leading companies in these market segments will fall in price, then not for long.
Our analysts advise investing in at least 10-15 companies over a period of 1-1.5 years.
To directly own shares of Pre-IPO companies, it is necessary to invest at least $1 million in each deal, and maintain a team of analysts, scooters and international lawyers. That’s why many private investors choose Pre-IPO funds. Investors buy shares of the fund, and the fund invests in companies and owns their shares. The ultimate owners of the fund’s assets are its shareholders.
The minimum threshold for entering the fund is $10,000. The fund offers its shareholders Pre-IPO deals, in each of which you can invest from $5,000.
We receive the main income from profit together with our shareholders. Fund commissions are: 5% subscription fee and 15% success fee.
Our analysts monitor all private technology companies on the late-stages that have the potential to go public in the foreseeable future. The most attractive from the investment point of view are identified among them. The search for deals to acquire shares in these companies is carried out by scooters – specialists who have very extensive connections in the technological world. They contact employees of companies with shares or early stage investors and offer them to sell part of their portfolio.
The investor has different ways to exit the deal:
1. The position can be fixed after the Pre-IPO of the company and after it’s listed on the stock exchange and the end of the lock-up period. The investor can allow the fund to sell its part of the shares, redeem the shares and receive money. If the investor does not want to sell shares at the current price, he can receive the shares to the specified brokerage account as a redemption of the shares.
2. If the investor wants to fix the position, after the Pre-IPO of the company is listed on the stock exchange during the lock-up period, the fund can buy options at his order. In this case, the share price will be fixed regardless of further changes in quotations on the exchange.
3. There is an over-the-counter market for selling shares before going public. By the end of 2022, we will have the release of an online platform for secondary transactions.
The United States is a fairly loyal investment jurisdiction and, at the same time, safe for investors.
Funds incorporated in Delaware are tax pass-through. This means that fund investors do not pay additional taxes in the United States, but pay only income tax at their place of tax residence.
In terms of guarantees, the investor can be confident that the fund will act strictly in accordance with its memorandum, operating agreement and unit subscription agreement. Investors are protected by US law, and the legality of the actions of Veligera Capital’s management is controlled by an external structure – the Managing Member, licensed fund Finartel Capital. The documentation of the Veligera Capital fund regarding the procedure for approving transactions is developed in a way to give members the broadest possible authority to approve investments. Providing shareholders with access to all documents for each deal of the fund ensures complete transparency. With regard to market risks, Pre-IPO is a type of venture capital investment and each investor must take these risks on themselves.
At the moment, Veligera Capital offers its investors a new deal every 2-3 weeks.
A fund registered under the laws of the United States cannot suddenly close. There is an established liquidation procedure. Fund managers are required by law to notify members of liquidation and fully distribute all assets between them in accordance with the signed agreements. Only after that procedure can the fund be closed.
The investor pays only income tax at the place of his tax residence. This obligation arises only after the redemption of the units and the receipt of profit. The Veligera Capital Fund provides the necessary accounting documents, and the investor independently or with the help of his tax lawyer declares the income received.
The money is deposited by SWIFT transfer from the investor’s bank account to the Veligera Capital fund account in Wells Fargo bank. The basis of payment is the purchase of fund units under the relevant agreement.
When the units are redeemed, the fund transfers money from its current account to the bank account of the member. The basis for payment is the redemption of the fund’s units under the relevant agreement.