Please read and acknowledge the following statement prescribed by Australian Securities and Investments Commission (ASIC):
- Investment in new business carries high risks. It is highly speculative and before investing in any project about which information is given, prospective investors are strongly advised to take appropriate professional advice.
- The information contained in this Publication has been prepared by or on behalf of the person who is proposing to issue or sell the securities or scheme interests and neither The Snowball Effect (Australia) Pty Ltd (or its related entities) nor the publisher has undertaken an independent review of the information contained in this Publication.
- The information contained in this Publication about the proposed business opportunity and the securities or scheme interests is not intended to be the only information on which the investment decision is made and is not a substitute for a disclosure document, Product Disclosure Statement or any other notice that may be required under the Corporations Act 2001 (Cth), as that Act may apply to the investment. Detailed information may be needed to make an investment decision, for example: financial statements; a business plan; information about ownership of intellectual or industrial property; or expert opinions including valuations or auditors' reports.
- Prospective investors should be aware that no established market exists for the trading of any securities or scheme interests that may be offered.
- This Publication is subject to Australian Securities and Investment Commission Class Order 02/0273.
Please understand the characteristics of this new marketplace
Companies making offers through Snowball Effect will range from very early stage businesses with little more than an idea, to more established businesses that may already be profitable. The risk of investing in a business tends to decrease as a business develops and matures. For very early stage businesses, history suggests that perhaps only one or two out of ten will make significant returns for investors. Despite the hopes and belief of the promoters, some will putter along without much happening for a long time. In others the total investment could be lost.
Investing in early stage businesses is risky. Overall, investor returns tend to be greater than the amounts invested, but you might not be one of the winners. Some of the other key risks include:
- Loss of capital – You could lose your entire investment.
- Illiquidity – There is no guarantee that you will be able to sell your shares when you want to, or at all. Currently, there is no recognised secondary market for trading shares in companies funded by equity crowdfunding. Buying and selling among existing shareholders is generally lawful, but some companies may not facilitate it. We expect that open market trading facilities will eventually be authorised, but that is not certain at this time.
- Lack of returns – Few early stage unlisted businesses pay dividends. They tend to reinvest what they earn in the growth or survival of the business.
- Dilution – Companies may need more funding to grow or to survive. If they issue further shares, your share of the company will reduce unless you put up your proportion of the new investment. That reduction is called dilution.
- Material events – Early stage businesses are often small and have narrowly focused offerings. This can increase the vulnerability of the business to internal and external threats, and make it harder to absorb material events such as loss of key staff and customers.
- Lack of control – As a minority shareholder, you may have little influence on how the company develops. Companies are ruled by simple majority for most decisions. For example, you will not determine who the directors are unless the majority of shareholders who vote on an issue agree with you.
To decrease exposure to the risks, these types of investments should only be made as part of a diversified portfolio. Spread your risks. Only invest money that you can afford to lose.
Remember that you will never get enough information to know in advance how things will turn out. No one, even the directors of a company, can know in advance with 100% certainty just what will make a business fly, and what will bring it down. Even in large public offerings the information available is never enough to be sure how the future will turn out.
Please seek independent advice if you don’t fully understand the characteristics of this marketplace or the information in an offer.
