Company update
In an update to investors in the third week of the campaign, Swart said its minimum investment "might be excluding some of our community" and reduced the minimum pledge to $234.50 for 350 shares at 67 cents per share. The original campaign, as reported by Stuff, offered 900,000 non-voting shares at $1.06 each, with the aim of raising a maximum of $954,000 and a minimum of $477,000.
The company also reduced its minimum goal to $335,000 and its valuation to $3.35 million, "which is around a 4 x multiple projected current year revenue. This is in line with other equity crowdfunding campaigns we've seen, like Ethique, though lower than some international skincare brands."
However, one potential investor pointed out to BusinessDesk that the new valuation did not make sense because, according to ed&i's own investment statement, projected current year revenue was $1.05 million, which would be a valuation of $4.2 million.
Even more confusingly, in the "details" tab of its webpage, the company had stated a different projected revenue for the current year of $978,612, which would give a valuation of $3.9 million.
BusinessDesk raised this discrepancy with Swart on late on Friday afternoon.
Crowdfunding ceases
On Tuesday Swart said she had not answered the query because she was meeting with PledgeMe about pulling the campaign and deferred questions to business partner Ferreira.
Ferreira, the former head of small business at the Bank of New Zealand, said the statements should have read the multiple was 3.17 times, adding that the error was based on a previous forecast revenue.
BusinessDesk also queried the amount in loans the company held, because the uploaded investment statements had been altered from their original.
ed&i's investment statement said "as at 1st June 2020, there were related party loans via financed lending worth $151,000."
However, in the electronic file, text underneath read that as at June 1, 2020, "there were related party loans issued by either the shareholders or related parties to the shareholders that totalled $310,000. This is made up of shareholder-introduced loans of $159,000 and financed lending."
Ferreira said that the above line was correct, with PledgeMe founder Anna Guenther adding that the $159,000 was share capital and not a loan.
Guenther said no investor money would be processed since the goal had not been met by its deadline.
"I'm really supportive of Ed and Harry and, if focusing on a few individual investors right now rather than a campaign with their crowd is what they want to do, we back them completely," Guenther added.
"Valuations are a hard thing to set, especially for early-stage companies. In this case, the valuation and multiple were lowered for the benefit of potential investors," she added.
PledgeMe holds a licence from the Financial Markets Authority and company information prepared for its latest capital raising said 31 campaigns raising $18 million had gone through the platform.
On each investment, the company warns that equity crowdfunding is risky and notes that usual rules for financial products do not apply to issuers.
- BusinessDesk
