Seedrs has terminated a deal to merge with rival platform Crowdcube, following a statement from the UK’s competition watchdog that it was minded to stop the transaction from going ahead.
Seedrs said it has agreed a new funding round for the business instead, with details to be shared in due course.
The Competition and Markets Authority had said a day earlier that merger between the UK’s two leading crowdfunding platforms could result in a “substantial lessening of competition” in the sector.
Crowdcube announced its agreement to buy Seedrs in October, though terms of the deal were not disclosed. The two firms had previously been bitter rivals, with differences of opinion over deal structures and the emergence of the secondary market.
“We fervently disagree with the CMA’s view, but given the low likelihood that they will change their mind at this point, we have concluded that it does not make sense to continue the battle,” Seedrs chief executive Jeff Lynn said in a 25 March statement.
Research conducted by the CMA as part of the inquiry showed Crowdcube and Seedrs have a combined share of between 90% and 100% in the supply of equity crowdfunding to small businesses and investors in the UK.
Crowdcube boss Darren Westlake said on 24 March that the crowdfunding platform was in a “very strong financial position”, with plans to be profitable in the first half of this year.
Kirstin Baker, chair of the CMA’s inquiry group, said the regulator had “reached the view that blocking this merger is likely to be the best way to maintain competition. The decision to block any deal is not taken lightly and is only made if there is a real risk of customers losing out.”
Investors in the platforms reacted negatively to the CMA’s statement, with one calling the conclusion “deeply flawed and short-sighted”.
“Their definition of the market is one dimensional and ignores the opportunity offered by the UK private capital market to support start up and fast growing British businesses,” said Tim Levene, chief executive of London-listed fund and Seedrs shareholder Augmentum Fintech.
“If we want to build great British companies that can scale and compete with their international competitors, we need to ensure that there are multiple channels for them to access capital.”
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