* Euronext creates secondary market for crowdfunded shares
* Starts with Belgian healthcare company Domobios
* Crowdfunding volumes surged fourfold in the UK last year
LONDON, March 1 (Reuters) - The European stock exchange Euronext is setting up a secondary market for shares in crowdfunded companies, a move the exchange says will increase liquidity and prompt more people to invest in startups.
On Tuesday, Euronext introduced a way to trade shares created by crowdfunding campaigns, by auctioning them on its Expert Market, an electronic platform for stocks not listed on the main market.
Crowdfunding helps businesses raise money by soliciting small investments, usually over the Internet. Companies can either work through middlemen such as MyMicroInvest and Seedrs or seek investors directly. In return, the investors get an equally small slice of the equity in the business.
Most crowdfunded businesses are startups, though, and may take years before they provide any return on the investment. Until recently, investors who wanted to sell their equity - and get a quicker return - had to find buyers themselves and agree on the sales price.
Crowdfunded shares already trade in informal secondary markets, but Euronext, which runs the Paris, Belgium and Amsterdam stock markets, is the first major exchange to open a market, analysts said. It began by placing on Expert Market shares in Domobios, a Belgian healthcare company, issued by MyMicroInvest.
“It’s a growth area but still a small market,” Vincent Van Dessel, chief executive of Euronext Brussels, told Reuters. “I expect further progress in this area in the coming months as we are not only in contact with crowdfunding companies but also in talks with their associations.”
Equity crowdfunding is a growing source of business funding. A recent study by the University of Cambridge and Nesta said it surged fourfold in the United Kingdom to 332 million pounds ($460 million) last year from 2014.
“When people invest in start-up firms, they assume their money is blocked for five to ten years. Euronext’s move seems a good idea as a secondary market will help the crowdfunding movement and encourage more entrepreneurship,” said Koen De Leus, a senior economist at KBC, which owns Bolero Crowdfunding.
Growth in this new area might come at a crucial time for Euronext. Its rivals London Stock Exchange and Deutsche Boerse are in talks to merge. The U.S. exchange ICE is also considering a bid for LSE.
It could also buoy crowdfunding, as small and medium-size businesses take part in the economic recovery of countries across Europe.
Winemaker Chapel Down and blockchain firm Coinsilium raised money via the Seedrs platform in 2014 and 2015, respectively. Shares in both became available on ICAP Securities & Derivatives Exchange, said Seedrs Chief Executive Jeff Lynn.
BrewDog, a Scottish-based craft brewery has had secondary trading in its crowdfunded shares via Asset Match, an online marketplace to buy and sell shares in unlisted UK companies.
Luke Lang, co-founder of Crowdcube, said increasing liquidity in such companies was important to draw in more investors, a view echoed by Olivier de Duve, chief executive of MyMicroInvest.
“Our ambition is to have more equity-linked crowdfunding notes being traded on the Euronext Expert Market in the future,” de Duve said. “This will help improving crowdfunding’s attractiveness and draw more investors to the industry.” ($1 = 0.7220 pounds) (Reporting by Atul Prakash; Editing by Sudip Kar-Gupta, Larry King)
Our Standards: The Thomson Reuters Trust Principles.