Risk Warning
Below we outline the risks associated with investments in securities that are not easily realizable and that are organized by a company through a crowdfunding platform.
Due to the possibility of losses, the Finansinspektionen considers that this type of investment carries a high risk.
What are the main risks?
You could lose all the money invested.
- Most investments are shares in emerging companies. Investors in these shares often lose 100% of the money invested, as most startups fail.
- It is possible that checks on the companies you are investing in, such as their expected performance, have not been carried out by the platform through which you are investing. You should conduct your own research before investing.
- Investments in small and medium-sized enterprises, especially in the early stages, have great growth potential and high profitability in case of success, but they also carry high risks of not achieving the expected profitability. The results of similar previous investments are not necessarily indicative of future results of other investments.
You will not quickly recover your money.
- Investments made with Akka materialize through the purchase of shares. Shares are not easily transferable, so recovering your investment cannot happen immediately.
- Additionally, the difficulty of transfer means that even if the company you invested in is successful, it could be years before you recover your money.
- The most likely way to recover your investment is if the company is purchased by another company or if it starts being listed on a stock market like the Madrid Stock Exchange. However, these events are rare.
The companies you invest in through Akka are startups or emerging companies.
- These companies rarely distribute dividends, as they prefer to reinvest profits to grow the company and generate more value for shareholders. Therefore, you should not expect to recover your money in this way.
Don’t put all your eggs in one basket.
- Investing all your money in a single business or type of investment carries risks. Diversifying your money across various investments makes you less dependent on the success of just one. A good general rule is not to invest more than 10% of your capital in high-risk investments.
The value of your investment can decrease.
- If your investment is in shares, the percentage of ownership of the company you hold will decrease if the company issues new shares. This could mean that the value of your investment is reduced, depending on how much the company grows. Most startups issue multiple rounds of shares.
- The creation of new shares can have consequences such as the loss or reduction of voting rights, dividends, or the value of the investment.
- Additionally, these new shares might have additional rights that yours do not, such as the right to receive a fixed dividend, further reducing the chances of obtaining a return on your investment.
You will not be able to make decisions in the project you have invested in.
- Minority investors have limited ability to influence the management of the companies in which they have invested. Therefore, they must rely on the entrepreneurial team’s ability to properly manage the company before investing.
It is unlikely that you will be protected if something goes wrong.
- The protection of the Deposit Guarantee Fund (FGD), in relation to claims against regulated companies that have failed, does not cover poor investment performance.
- The protection of the Complaints Service of the Sveriges Riksbank (SR) does not cover poor investment performance. If you have a complaint against a platform regulated by the Finansinspektionen, the SR may examine it. For more information on SR protection, click here.
If you are interested in learning more about how to protect yourself, and for more information on investment-based crowdfunding, visit the Finansinspektionen website here.
