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What is exit via diversification™

Learn more about how our share exchange product works and the value of diversification.

BlogShare Exchange

planD offer investors exit via diversification™ – a way to crystallise an exit from illiquid, underperforming private investments which are tying up significant capital 

Traditionally when you think of an ‘exit’ you think of a cash transaction – you sell 1,000 shares at £1 / share and you receive £1,000. However, a share for share exchange means the consideration paid is shares not cash – so, you sell 1,000 shares at £1 / share and receive £1,000 worth of shares in return. 

planD are the investment adviser to a fund called Daxia whose strategy is to acquire shares in illiquid underperforming companies at today’s fair value – the shares you receive in consideration for selling your underperforming single share, are shares in a fund that has done many deals. As such, if the company you have exchanged into the fund goes to zero, you still own the shares in the fund and benefit from exits which may occur from other companies in the portfolio. 

Over £30Bn has been raised through (S)EIS since its launch and we believe that given 8 out of 10 startups don’t achieve what they set out to do, much of this initial investment value will be underwater and therefore locked-in. This is understandable – if a company has come down in value, having not achieved its goals, there are not many people who would want to buy shares in that company; and if there were, they would want to buy a Primary issue where the cash goes into the business to further the cause – not a Secondary to line the pockets of a disaffected investor who simply wants to exit and take their losses. 

The tax breaks for early stage investing are an important part of the venture ecosystem – whether using the ability to offset losses against income (specific to (S)EIS) or simply using losses to reduce a capital gain made elsewhere – however, you have to actually crystallise the loss in order to be able to use it! 

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