In order to minimise the likelihood of fraud, 1X recommends that investors familiarize themselves with the 1X Platform, their rights as an investor, and the companies in which you are investing.
You should seek independent professional advice if you do not fully understand the risk of investing through 1X Platform.
Most of the companies listed on 1X Platform are early stage or small-medium enterprises. Investing in early stage companies comes with a lot of risks and there is no way of predicting with 100% certainty whether an early stage company you invest in will succeeded to the point you will get your investment back. The reality is, most early stage companies fail. Therefore, investing in these companies may involve risks and challenges mainly due to the low probability of success and low liquidity.
The trading volume of Tradeable Securities (“RepSec”) on 1X Platform may be low or not existent. Due to the low or no trading volume, there is no certainty that you will be able to get out of your investment at all.
Companies listed on 1X Platform are essentially private companies that are not subject to disclosure requirement expected of a public-listed companies. Hence, other than those disclosures that the companies are required to disclose under the 1X Rules, you as an investor will not receive any other information about the company.
You should NOT invest in the securities unless you fully understand the risks and are prepared to take the risks. You should carefully consider whether this investment is suitable for you in light of your knowledge and experience in financial and business matters, investment objectives, financial means and the risks that you are prepared to take.
Below we have a list of risks that you should consider before making any investment through our Platform. However, the list is not intended to be fully inclusive of all relevant risks that may occur. Therefore, you should regularly review the company’s information available on the company’s website, on our Website or other public sites or seek professional advice.
Loss of investment
The biggest risk to an investor is losing the investment completely. A lot of early stage businesses are at the risk of failing completely or barely surviving with no profits or growth. In such cases, it is highly likely that you might lose your investment completely. Even if a company does become profitable, it is not a guarantee that you will get all of your initial investment back or get a return on that investment. The returns you could potentially receive might not cover the initial investment and be inconsistent in amount and frequency.
Loss of investment is related to general risks as well as business related risks. General risks can include geographical risks, political risks, legislative risk, and economic risk. Business risks include mainly market demand risk, industry risk, competition risk, growth risk, employee risk, fraud risk, and revenue risk.
Risk of dilution
Early stage companies usually have more than one funding round, meaning they are likely to raise more capital later on in the future. During those rounds, depending on the type of investment opportunity, new investors may get a share of the company’s equity. This dilutes the percentage of ownership for current investors because new shares are issued.
The new shares might have some advantages to the new investors like preferential rights to dividends or other matters. This could be a disadvantage to previous investors, who invested into the early stage company on different, less accommodating terms.
Low or No Liquidity
Although investments can be traded on our Platform, there is no assurance that active trading will be sustained. There may be difficulty in selling an investment caused by a number of factors, including, but not limited to, market conditions (e.g. lack of demand) or insolvency of the company. In these circumstances, you may not be able to sell your investments in a timely manner and the value of those investments may fall significantly.
In addition, there is a risk that the trading platform operated by 1X may be closed down in case the regulatory treatment changes.
The trading price of RepSec may be volatile and could fluctuate significantly and rapidly in response of various factors that is beyond the control of the company. These fluctuations may be exaggerated if the trading volume of the RepSec is low. Due to the possible price volatility, you may not be able to resell your investment at a price that is attractive to you, or at all.
Rarity of dividends
Start-ups or small-medium companies will rarely pay dividends to their investors, mainly because the profits are typically re-invested into the business to fuel growth and build shareholder value. This means that you are unlikely to see regular proceeds from your investment unless you decide to sell the instruments through our Platform.
Risks of investing in foreign companies
If investments are offered by a company incorporated in a foreign jurisdiction, your investment will be subject to the laws and regulations of that jurisdiction. You may also be subject to additional tax liabilities, transaction costs and capital controls.
You may also have difficulty serving the company with legal process or enforcing judgements against foreign companies.
No assurance that information from the companies that you invest in will be accurate or accessible
The financial statements of the companies which you invest in may not be subject to a statutory audit. As such, the financial information presented to you may not have been ascertained by a qualified professional auditor. An unaudited financial statement may not accurately reflect the financial health of a company. In addition, the information made public by the company might be too general and not verified by independent parties.
Disclosure of information by the companies may not be prompt to allow you to take timely action to buy or sell the RepSec on our Platform.
Complex Product Structure
The RepSec traded on our Platform is securities issued by a Special Purpose Vehicle (“SPV”) that in turns holds a proportion of the underlying company’s shares. Due to the complex product structure, investment in RepSec can be considered as complex for investors in terms of understanding the nature and the risks of the instrument. Complexity is a relative term, and is subjective depends on the investors’ investment knowledge and experience.
We have taken measures to mitigate the risks but there are no assurance that the described or other risks will not materialise. You should seek independent professional advice if you do not fully understand the risks of investing through our Platform.