A new film to be directed by Lee Tamahori is hoping to raise the final 5.3 per cent of its $9.4 million budget via equity crowd funding on the Snowball Effect platform, offering investors preferred shares with a 20 per cent per annum return.
The film 'The Patriarch', based on the 'Whale Rider' author Witi Ihimaera's novel 'Bulibasha', is looking to raise a minimum of $300,000, with a cap of $500,000, from New Zealand investors via equity crowd funding. The project is hoping to lure investors after Tamahori's success with his first, and to date only, New Zealand film, 'Once Were Warriors'. Filmed on a $2 million budget in 1994, it went on to return $6.5 million to New Zealand investors, the offer says.
'The Patriarch' project is offering Snowball investors $1 per share in invesment vehicle Patriarch Investment Company, with a minimum investment of $100.
Snowball investors are being pitched as preferential equity investors, alongside pre-committed investors, who have put $1.15 million forward, and if the film is successful, will recoup their investment as well as a 20 per cent premium on income before other investors.
On a pessimistic outlook, it expects to make $2.32 million on sales, which after distribution costs and various expenses would leave $1.66 million to be returned to investors, returning some 19 per cent above the preferrential equity investors orginal investment. On a realistic outlook, the film looks to make $6.2 million in sales, with a $3.2 million in preferrential eequity, a 94 per cent gain on their investment, the offer touts.
Under the film's return scheme, once preferential investors have recouped their investment, the remaining income is then split into two corridors, with preferential investors continuing to take a 20 per cent stake, and the remaining 80 per cent going to next in line, down a series of layers of funders, only moving to next in line once all owed have recouped their set aside returns
The majority of funding for the film comes from the government, with The New Zealand Film Commission pitching in $2 million and New Zealand on Air contibuting $400,000, for television funding based on agreement with Maori Television and Prime Television. The film also has secured a $3.52 million government rebate from the New Zealand Screen Production Incentive, to be paid once the film is finished.
Last year the government combined its Large Budget Screen Production Grant (LBSPG) and Screen Production Incentive Fund (SPIF) into a single scheme called the New Zealand Screen Production Grant. Existing rebates of 15 per cent for the LBSPG and up to 40 per cent for the SPIF were replaced by two rebates - 20 per cent plus an extra 5 per cent for productions that meet special criteria and up to 40 per cent for New Zealand productions, like 'The Patriarch'.
Trans-Tasman distributor Hopscotch and internatioal distributor Wild Bunch have put forward $537,000, along with Maori TV and Prime TV for the rights to sell, screen and televise the film. Contractor Investors, who are deferring or reinvesting a portion of their fees and services, have put in $1.29 million.
NZFC and NZOA are second to recoup after the preferential investors, taking 75 per cent, with 5 per cent recouped by writers. Following that a further 75 per cent of deferred NZFC and production company Eyeworks early development costs is recouped. Contractor investors follow, and finally producers receive their income through equity from the NZSPI.
The remaining net profit, what is known as the film's "back end" is then split, with the remaining 40 per cent going to the film makers and 60 per cent to equity investors, split on a pro-rata basis between preferential equity investors and other equity shareholders, like NZFC.
The film offer, which runs until the end of September, had raised 5 per cent, or $14,100, of its targetted $300,000, with contributions from 18 crowd-funding investors since going live at 2pm on Tuesday afternoon.
Snowball Effect is licensed under the new Financial Markets Conduct Act, which came into effect on April 1, providing a regime where projects can raise a maximum of $2 million offering equity through crowd sourcing platforms. The licensing is part of the Financial Markets Authority's expanded brief to bolster New Zealand's capital markets but the new platforms do carry risks for lenders, with reduced compliance obligations for small capital-raisings compared to companies listed on the NZX mainboard.
Last month, Blenheim boutique beer brewer, Renaissance, the first of Snowball's offers, wooed small investors to fill its order for $700,000 of new capital in just a week and a half, a quarter of the time the novel offer was open for punters to commit funds. Shares were offered with a $500 minimum investment at $2 apiece for 12.28 per cent of the company.