Secondary Market – May Update

Secondary Market – May Update

19th May 2020 by Joel Ippoliti

When investing, your capital is at risk.

May was Seedrs largest market to date with a record £1.27m worth of shares sold, that is a 400%+ increase on the last market!

It marked the status change of Revolut from ineligible to eligible due to a share price change from their last funding round, volumes of which drove significant transactions. On market open, we saw just north of 1,000 concurrent investors accessing the market and making purchases with over £250k transacted in about three minutes. We’d scaled infrastructure significantly in preparation for the event but an internal firewall blocked one of our own systems for a couple of minutes, thinking we were under a denial of service attack. We quickly rectified this within two minutes, and were back underway – a great response from our team and another learning as we scale to cater to massive demand. 

We made a number of other smaller changes including an in-platform notification, alerting sellers to confirm a sale (we saw a decrease of users failing to accept a sharelot sale due to inaction by 3.3%pts or 65%) and we made the links to eligibility and ‘how it works’ clearer. We had planned to add a feature that remembered your filter settings as you navigated from the business list to the business profile and back, but we decided to push that back to the next market and combine it with a more fundamental change – I’ll cover that later.

The sharelot sales volume by price tier is broken out as follows:

This time, we saw 151 lots above £1k, far exceeding our expectations (all of which attract stamp duty) and justifying a previous change of removing the limits and partly automating the stamp duty process. 

There was strong sell-side demand in the market with over £4.3m worth of shares submitted for sale and £3.1m listed (the difference was due to ineligibility). The £3.1m that was listed was split out across 5,548 lots, of which 1,803 were sold.

We ended with a clearance rate of 40% by value (3.1m listed against £1.27m sold) and 32% by volume (5,548 lots listed against 1,803 sold). We saw 528 sellers and 671 buyers across 167 businesses.

These sales can be broken out by sector as follows:

…and values by business as follows:

Going into every market cycle, we try to release improvements to the experience, some smaller and some larger, depending on our other priorities. We have a number of larger changes upcoming on our roadmap in the following order (all of which are designed to increase clearance rates):

  • Partial sharelots – allowing buyers to offer to buy smaller ‘pieces’ of a sharelot
  • Allowing buyers/sellers to connect anytime (even when the market is closed)
  • Allowing buyers/sellers to place bid/ask notifications and price negotiate

Last cycle, I mentioned a desire to prioritise partial sharelots so sellers don’t have to manually break out lots to match smaller buyers. I also noted that in order to do this, we would need to make a number of changes to the buying and listing journeys. We still intend to prioritise this work, but acting based on the data we are seeing, we saw strong results of the 1k sharelots and are aware that the pandemic is putting pressure on our primary raise deal volume.

Therefore for May’s market, as a precursor to opening the market up completely, we will bring the primaries and secondaries together on the same page, and allow sharelots to be listed anytime whilst the market is open, (provided there has already been a business available with a sharelot in that market). This is a relatively small change and we think it will help the clearance rates whilst we continue to track down and implement the larger initiatives – namely partial sharelot sale. 

The ability to list sharelots anytime (coming next) and making them available to purchase anytime (coming later) will shift the rush from market open to sharelot ‘available’, in which case having notifications working smoothly will be crucial. This is a feature we are still building and we acknowledge that we had a few bugs and there are still some usability issues to work out, but watch this space as we continue to refine it. All these working together, released in a particular sequence, need to combine to create a positive experience that doesn’t advantage anyone, something we are very conscious of.

I will share how the latest releases are performing in the next market’s update.

For June’s market we already have more submitted for sale than April at £4.4m (about 50% of which was submitted from the auto re-list feature) with a record number of sellers at 1,450. I expect this number to continue to increase through to market open on June 2nd and whilst I don’t expect the market to be as large, we are expecting good sell-through rates and continued usability improvements to benefit our users.

Joel Ippoliti

Joel Ippoliti

Chief Product Officer

Digital Agency Kent