Risk warning
To help you understand the risks involved when investing in shares, please read the following risk summary.
Risks when investing in equity
Investing in shares (also known as equity) does not involve a regular return on your investment, unlike mini-bonds which offer interest paid regularly.
Please bear in mind the following particular risks for equity investments:
Loss of investment
The majority of start-up businesses fail or do not scale as planned and therefore investing in these businesses may involve significant risk. It is likely that you may lose all, or part, of your investment. You should only invest an amount that you are willing to lose. If a business you invest in fails, neither the company – nor any Organisation – will pay you back your investment.
Lack of liquidity
Liquidity is the ease with which you can sell your shares after you have purchased them. Buying shares in businesses pitching cannot be sold easily and they are unlikely to be listed on a secondary trading market. Even successful companies rarely list shares on such an exchange. In addition, if you purchase B Investment Shares, these are non-voting shares and may not be attractive to potential buyers.
Rarity of dividends
Dividends are payments made by a business to its shareholders from the company’s profits. Most of start-ups or early-stage companies, and these companies will rarely pay dividends to their investors. This means that you are unlikely to see a return on your investment until you are able to sell your shares. Profits are typically re-invested into the business to fuel growth and build shareholder value. Businesses have no obligation to pay shareholder dividends.
Dilution
Any investment in shares may be subject to dilution in the future. Dilution occurs when a company issues more shares. Dilution affects every existing shareholder who does not buy any of the new shares being issued. As a result, an existing shareholder’s proportionate shareholding of the company is reduced, or ‘diluted’-this has an effect on a number of things, including voting, dividends and value.