Stripe

Risks inherent in the project that could lead to its failure and result in a total loss for the investor:

Project risks

• The project owner will generate income exclusively through capital gains realized upon the sale of the holding and, if applicable, through dividend payments from the target company. The project owner is therefore entirely dependent on the target company’s business performance, as well as on the performance and marketability of the holding. All risks and adverse developments affecting the target company have an unrestricted impact on the project owner.

• There is a risk that the project owner may misjudge the target company’s future development and, consequently, misjudge the value of the holding at the time of acquisition, which could result in the need for impairment charges on the holding at a later date. The project owner must assess the positive development of the holding based on the information available to it regarding the economic situation, development, and prospects of both the target company and the market environment in which the target company operates. In this respect, this is always a forecast-based decision regarding the future development of the target company and the business model it operates or intends to operate. The target company’s business model may prove to be unsustainable contrary to the project owner’s original assessment. Misjudgments regarding the competitive situation cannot be ruled out either. In addition, operational errors could be made during the (further) implementation of the target company’s business model. Furthermore, at the time the project owner makes the investment decision, unforeseeable circumstances beyond the project owner’s control could impair the target company’s planned development. For example, the economic conditions affecting the target company’s business operations could deteriorate, or the target company could, through no fault of its own, become the target of criminal or terrorist acts or suffer reputational damage. It cannot therefore be ruled out that the target company’s revenue, profitability, and/or enterprise value may not develop as expected, may not be increased, or may even decline in the future. Dividend payments from the target company to the project owner may not be made. Nor can the target company’s insolvency be ruled out.

• Forecasts of the potential sales proceeds for the holding may prove to be inaccurate. Past market or business trends are not a basis or indicator of future developments.

• The project owner will acquire a holding exclusively in the target company and will not build a diversified portfolio of companies. Such a focused investment strategy is riskier and makes the project owner vulnerable to all negative effects of economic, political, regulatory, technical, and industrial market conditions and/or changes affecting the target company.

• The project owner will hold only a minority holding in the target company. As a minority shareholder, the project owner is limited to exercising its statutory shareholder rights. It has no authority to issue instructions to the target company’s management. At the target company’s shareholder meetings, the project owner may be outvoted.

• The target company is still in the startup phase. Investing in a startup is particularly risky because such companies typically have underdeveloped business models that could fail entirely and have significant liquidity needs that may not be met.

• The target company is a globally active provider of payment processing and financial infrastructure software, with a high private market valuation that has fluctuated significantly over time. An investment in such a highly valued, non-listed technology company is particularly risky, as a valuation correction, an intensification of the competitive and regulatory environment, or a slowdown in growth in digital payments cannot be ruled out. The specific risks arising from the business activities of the target company include: intense competition fromestablished payment service providers (including Adyen, PayPal/Braintree, Block (Square), Worldpay, Checkout.com) as well as from big tech companies that are increasingly offering their own payment infrastructure (including Apple, Google, Amazon); dependence on the ongoing acquisition and maintenance of payment services licences in numerous jurisdictions; regulatory risks in connection with tightened requirements for payment service providers and e-money institutions (including PSD2/PSD3, the E-Money Directive) as well as the Digital Operational Resilience Act (DORA); risks relating to cybersecurity and the protection of payment and customer data; dependence on the further development of global e-commerce and digital payments volumes; regulatory uncertainties in connection with expansion into new business areas such as stablecoin and crypto infrastructure; concentration risk due to dependence on major customers and platform partners; risks arising from changing interchange fees and payment regulation.

• The target company’s business performance and the demand for its products and services depend entirely on factors over which the project owner has no control. In addition to negative market developments in the specific markets in which the target company operates, these factors include general economic conditions and macroeconomic trends, adverse developments in the capital and financial markets, trade conflicts, tariffs, wars, as well as other developments in the political, social, regulatory, or macroeconomic environment. The extent to which such developments will impact the global economy cannot be conclusively estimated. As in previous years, pandemics and armed conflicts, for example, could continue to lead to supply bottlenecks, high inflation, and sharp declines in global stock markets, thereby negatively impacting the target company’s business. The duration and intensity of the effects of negative developments are uncertain.

• The exact number of outstanding shares of the target company does not necessarily have to be publicly known or fixed at the time of the investment. The target company may issue additional shares – for example in connection with an initial public offering (IPO), the financing of an acquisition, further financing rounds or employee participation programmes. Such issuances lead to dilution of the existing shareholders: the total number of shares increases and the proportion of the company attributable to each existing share decreases accordingly. As a result, the valuation at which the structured investment was entered into may, in retrospect – with reference to the effective valuation per share – prove to be higher and change to the detriment of the investor. In particular, the overall valuation of the target company may rise while the value attributable to an individual share – and thus to the investor’s participation – does not increase to the same extent or may even fall. The indicative valuation figures stated in the documents are therefore not a reliable indicator of the performance of the investor’s participation, which depends on the value per share at the relevant point in time.

• There is a risk that significant competition, both from dynamic startups and large, established market players, will make it difficult for the target company to enter the market and expand its market share, particularly because the target company operates in a highly competitive industry with moderate barriers to entry. Other companies could react more quickly than the target company to new or changing market conditions, engage in more extensive and cost-intensive marketing activities and pursue a more aggressive pricing policy, as well as offer their customers more favorable terms than the target company.

• The marketability of the holding depends on many factors, particularly the performance and future prospects of the target company. There is a risk that no buyers will be found for the holding, or that they will not be found on reasonable terms. This could result in a total loss for investors.

• There is a risk that the target company will not conduct an IPO (Initial Public Offering), i.e., a stock market listing. The reasons for this can be varied and may stem not only from a lack of economic growth or the failure of the target company’s business model, but also from the general economic and geopolitical situation. Failure to go public may result in the inability to sell the holding on a permanent basis.

• In the event of an IPO of the holding, there is a risk that the project owner will not be able to sell the holding until after a so-called lock-up period of 6–12 months has expired, which would prevent profit-taking immediately following the IPO. After the lock-up period expires, the share price of the holding could be significantly below the issue price and also significantly below the project owner’s acquisition price.

• Until the holding is sold on the stock exchange, it is subject to normal market price fluctuations, which may result in the holding being sold only at a loss.

• If an exit via a so-called SPAC (Special Purpose Acquisition Company) were to be carried out with respect to the holding, the project owner would receive shares in the SPAC instead of cash proceeds, which the project owner would first have to liquidate—i.e., sell—which may not be possible under certain circumstances.

• The project owner will acquire the holding in a foreign currency (USD). Accordingly, investors who purchase the bonds in euros and receive the profit share and the redemption of the bonds in euros are exposed to exchange rate risks that could result in a significant reduction in the value of the variable profit share and jeopardize the redemption of the bonds at par value.

• Interdependencies in legal, economic and/or personnel terms exist at the level of the project owner in that Sascha Miller is both the managing director of the project owner’s general partner GmbH and a shareholder and managing director of other companies in the Cometum Group through which structuring and distribution fees for this issuance are channelled. Such interdependencies may give rise to conflicts of interest which may result in decisions by the persons and companies concerned that are not taken exclusively in the interests of the project owner and/or the investors, because such decisions are not made as they would be between unrelated third parties, but may also take into account the interests of the persons and companies concerned. Due to these interdependencies, the parties involved may not be able to exercise their management functions with the requisite independence and may subordinate the interests of the project owner to their own personal interests.

• At the project owner level, but particularly at the level of the asset manager who manages the holding on behalf of the project owner, errors on the part of the respective management cannot be entirely ruled out. These errors may lead to unforeseen costs that could have a negative impact on the value of the holding. The project owner’s financial success depends on the asset manager’s administration of the holding. Should this key provider of expertise be lost, there is a risk that the holding can no longer be effectively managed. This may result in necessary decisions regarding the timing and terms of the sale of the holding not being taken, or not being taken in good time, which may lead to a financial disadvantage for investors.

Sector-specific risks may arise, for example, from changes in the macroeconomic situation, a decline in demand in the sector in which the project owner is carrying out the crowdfunding project, and dependencies on other sectors. The target company, in which the project owner plans to acquire a holding, operates within Section K 66.19 (“Other activities auxiliary to financial services and insurance activities n.e.c., including payment processing services”) according to the classification in Article 2(1)(a) of Regulation (EC) No. 1893/2006 of the European Parliament and of the Council (Regulation)5. The business performance of the target company and the demand for its products and services depend entirely on factors over which the project owner has no influence. In addition to negative market developments in the specific markets in which the target company operates, these factors may include adverse developments in the capital and financial markets, a decline in global e-commerce and digital payments volumes, stricter regulatory requirements for payment service providers and e-money institutions – in particular under PSD2/PSD3, the E-Money Directive and the Digital Operational Resilience Act (DORA) – as well as increased competitive pressure from established payment service providers and big-tech providers. Furthermore, trade conflicts, tariffs, geopolitical tensions or other developments in the political, social, regulatory, or macroeconomic environment could negatively impact the target company’s business. The extent to which such developments will impact the global economy cannot be conclusively assessed. The duration and intensity of the effects of negative developments are uncertain.

There is a risk that the project owner may become insolvent or over-indebted, leading to the initiation of insolvency proceedings. This could result in the investor suffering a total loss of the subscription amount and the variable profit share. Other events related to the project or the project owner may also result in investors losing their investment. Such risks can be caused by a variety of factors, including:

• (serious) change in macroeconomic situation,

• mismanagement,

• lack of experience,

• fraud,

• financing that is not in line with the business purpose,

• lack of value growth and marketability of the holding,

• insufficient cash flow.

This investment is suitable only as a component of an investment portfolio and only for investors who can afford to incur a loss, up to and including the total loss of their investment amount. This investment is not suitable for investors with short-term liquidity needs and is not suitable for retirement planning.

a) Pre-insolvency enforcement bar

A pre-insolvency enforcement bar applies to all investors’ claims for payment arising from the bonds (variable profit share and repayment). Therefore, payments on such claims are excluded to the extent that such payments would lead to the project owner’s insolvency within the meaning of § 17 of the German Insolvency Code (hereinafter “InsO”) or to the project owner’s over-indebtedness within the meaning of § 19 InsO, or if the project owner is already insolvent within the meaning of § 17 InsO or over-indebted within the meaning of § 19 InsO. This also applies in the event that the payment claims of the individual investor, taken on their own, do not constitute over-indebtedness within the meaning of § 19 InsO or insolvency within the meaning of § 17 InsO, but the sum of all claims against the project owner would constitute over-indebtedness within the meaning of § 19 InsO or insolvency within the meaning of § 17 InsO. The pre-insolvency enforcement bar may result in a permanent, indefinite failure to satisfy the investor’s claims arising from the bonds. Consequently, the existence of an investor’s claim to payments depends on the project owner’s financial situation and, in particular, on its liquidity position. The pre-insolvency enforcement bar results in a fundamental change in the nature of the capital contribution, shifting from debt capital with an unconditional repayment obligation to an equity-like investment with a liability function similar to that of equity. The investors’ capital becomes economic equity in the project owner and serves as collateral for creditors who have not subordinated their claims. There is a risk that the project owner’s assets will be depleted in favour of these creditors. Investors are subject to a risk that, in and of itself, applies only to shareholders, without being granted the corresponding rights to information and participation. In shareholders’ meetings, for example, shareholders may decide whether to continue business activities that may be loss-making and thus risk fully depleting the contributed capital. The investor does not have any such information and decision-making powers under the partial debentures. Investors are therefore exposed to the risk that, in the event of corresponding losses, the shareholders may, contrary to the interests of the investor, resolve to continue the business activities and not to discontinue them. This gives rise to the risk of a complete loss of the capital invested. For investors, this means that the risk they assume may, in certain respects, even exceed the business risk borne by a shareholder. The pre-insolvency enforcement bar may lead to a permanent, indefinite failure to satisfy investors’ claims. If the pre-insolvency enforcement bar is not removed, this will result in a partial or total loss of the investment amount for the investor. By purchasing the bonds, investors assume a risk that goes beyond the general risk of insolvency.
 

b) Subordination Risk

The investment consists of qualified subordinated bearer bonds. In the event of the opening of insolvency proceedings against the project owner’s assets, the investors’ subordinated claims rank behind the claims defined in § 39 paragraph 1, number 1 through 5 InsO. This means that investors’ claims will be considered only after these claims and all non-subordinated claims have been fully and finally satisfied. The amount of actual payments to investors is therefore dependent on the size of the insolvency estate. If the insolvency estate is insufficient to make payments on subordinated claims in the insolvency proceedings, this would result in the total loss of the investment amount for investors.

There is a risk that the project owner’s financial performance may be lower than expected, which could result in a delayed, reduced, or no return for the investor. Investors may therefore lose all or part of their invested capital. In addition, inflation, exchange rate fluctuations, costs and individual tax circumstances may further reduce the return.

There is a risk that the crowdfunding platform may be temporarily or permanently unavailable or may cease its business operations. In such a case, delays in communication as well as in the redemption of the bonds and in the payment of any profit share may occur. The contractual claims of investors against the project owner remain unaffected; however, the enforcement of such claims may become more difficult. As the crowdfunding service provider does not at any time obtain possession or ownership of the investors’ funds and payment processing is carried out through a payment service provider, a loss of the invested capital based solely on a platform failure is unlikely.

• The bonds have a fixed maturity and are not subject to ordinary termination by the investors during their term. The repayment of the bond principal is due on 03.08.2029. In addition, the project owner is entitled to extend the term by up to two times by 12 months each time, up to a maximum term extending until 03.08.2031, without requiring the investors’ consent. The investor faces the risk of not being able to access the invested capital before the end of the extended term; thus, the investor may have to wait longer than expected for the repayment of their invested capital, which could adversely affect their financial planning.

• A transfer of the bonds is only possible to a limited extent, as the transfer is technically restricted to registered digital safe deposit boxes. The entity maintaining the e-securities register is Smart Registry GmbH, registered in the commercial register of the Local Court (Amtsgericht) Charlottenburg (Berlin) under registration number HRB 234468 B. The digital safe deposit box is an IT application that enables the custody and transfer of e-securities. Currently, there is neither stock exchange trading nor a liquid secondary market for the bonds. Even if the bonds were to be admitted to trading at a later stage, it is uncertain whether a functioning market would develop. Investors may therefore be required to hold the bonds until maturity and bear the risk of not finding a buyer or being able to sell the investment only at a financial loss. The bonds may prove to be completely illiquid.

In addition, the following securities-related risks apply:

• No influence or participation rights: The bonds give rise exclusively to contractual claims against the project owner and do not grant any participation, involvement or voting rights in the shareholders’ meeting of the project owner. Shareholder resolutions may be adopted at the shareholders’ meeting of the project owner which may have an adverse effect on individual bondholders. Bondholders have no possibility to influence the business activities of the project owner. This also applies to the utilisation of the capital raised through the issuance of the bonds. In particular, bondholders have no possibility to terminate loss-making business activities of the project owner before the contributed capital has been utilised. This may result in a total loss of the invested capital for the bondholders.

• Deterioration of terms by majority resolution: According to the terms and conditions of the bonds, these may also be amended during the term of the bonds if the approvals required under the terms and conditions of the bonds are obtained by corresponding majority resolutions of the bondholders. Each individual bondholder therefore bears the risk that amendments to the terms and conditions of the bonds may be adopted against their will by majority resolution of the bondholders, which may adversely affect them (e.g. extended maturity or waivers).

• Technology and database risks: The technology and all related technological components and regulated services (e.g. digital custody, maintenance of the e-securities register) are still at an early stage of technical development. Bondholders face the risk that this technology may be subject to technical difficulties or that its functionality may be impaired by external influences. A partial or complete failure of the electronic decentralised database relevant for the e-securities (hereinafter the “E-database”) may temporarily or permanently prevent the bondholder from accessing their e-securities.There is a risk of attacks on the network or on the E-database used. Various types of attacks are conceivable. Such attacks could render the network or the E-database unusable, so that bondholders would no longer be able to transfer the e-securities. If the network or the E-database becomes completely unusable, there is a risk that bondholders may no longer have access to their digital safe deposit boxes. In the worst case, this could lead to the irretrievable loss of the e-securities. The project owner provides bondholders, via an authorised custodian of e-securities, with a technical solution enabling the holding, storage and disposal of e-securities. There is a risk that this solution may be flawed and/or particularly vulnerable to potential hacker attacks. As a result, bondholders may temporarily or permanently lose access to their e-securities, which in the worst case may lead to the irretrievable loss of the e-securities. The ongoing administration, in the sense of exercising the rights and obligations arising from the e-securities, is performed neither by the custodian of e-securities nor by the project owner.

• Risk of early redemption by the project owner: The project owner is entitled to redeem the bonds early and repay the bondholders if and to the extent that the bond proceeds cannot be used to acquire a holding, which may be the case in particular if insufficient shares of the target company are available. In addition, the project owner may terminate the bonds early in the event of divestment if it receives proceeds from the sale of the holding. In this case, the investor bears the risk that, as a result of the early redemption of the bonds, their investment will yield no return. Furthermore, the project owner will use part of the subscription amount to cover “Entry Costs II” and the “additional costs”— as defined in Part H (a) of the KIIS. Since the “Entry Costs II” and the “Exit Costs” as defined in Part H (a) of the KIIS are payable in any case for a period of 3 years, the repayment of the nominal amount of the bonds at the end of the term may only be partially possible or not possible at all, depending on the amount of the proceeds from the sale of the holding as defined in Part D (h) of the KIIS. Furthermore, it is possible that the investor will only be able to reinvest the repaid capital on less favorable terms than those of the bonds.

The risks listed above are not the only risk factors that may affect the business activities of the project owner. Other risks and uncertainties that the project owner currently does not consider relevant or is not currently aware of may also have a material impact on the business operations, business results and financial standing of the project owner.

The valuation of the target company, in which the intermediate entity acquires shares, is shown as a maximum valuation. The intermediate entity acquires shares in the target company through negotiations on private markets. The representatives of the intermediate entity have indicated a maximum valuation for the transaction on private markets for the target company prior to issuing the bond in the intermediate entity.

This maximum valuation is indicative of current markets prices of the target company in private markets. The final valuation of the target company is known upon completing the transaction.

The target company valuation is determined based on available supply of shares in the target company and the demand for those shares on private markets. The valuation of the target company to the intermediate entity upon completing the transaction reflects the valuation the intermediate entity could ultimately acquire shares in the target company for.

In private markets, the valuation at which investors can gain access to a company may differ from the valuation reported in the company’s most recent primary funding round.

This can happen because primary and secondary transactions are different. A primary funding round is always a direct capital raise by the company. A secondary transaction, on the other hand, involves existing shareholders selling their shares or economic exposure to other investors. There is no money flowing into the company.

For highly sought-after private companies, secondary market prices can be higher than the last known primary valuation. This is especially the case when access is limited, demand is strong, and only a small number of shares or investment opportunities are available.

Not necessarily, but it is an important point to consider.

A higher entry valuation can reduce the potential upside for investors, because the company would need to grow further from that higher valuation level to generate a positive return. At the same time, some investors may still consider the opportunity attractive if they believe the company has strong long-term growth potential and if access to the company is otherwise very limited.

Ultimately, each investor should assess whether the expected entry valuation is attractive in relation to the potential return, the risks, the investment horizon, and their own portfolio strategy.

No. The final entry valuation may depend on the actual transaction terms available in the secondary market.

In some cases, the expected maximum valuation is communicated as an upper limit or reference point. The final entry valuation may be lower if shares or economic exposure can be acquired on more favourable terms.

There is no single correct answer. A valuation can be assessed by looking at factors such as the company’s market position, growth expectations, business model, comparable companies, recent funding rounds, secondary market indications, and the potential exit scenario.

The decision ultimately depends on your own view of the company’s future development and whether you consider the potential return sufficient for the risks involved.