Risk Disclosure

Material risks of a stake in non-listed companies via the EQUEX marketplace.

Fundamentals

Stakes in non-listed companies are high-risk. A complete loss of the capital invested is possible. There is no deposit insurance and no claim for compensation against a protection fund. Invest only amounts whose complete loss you can bear economically and personally.

These notes describe material risks, but not exhaustively all of them. They replace neither the independent review of the specific offer nor advice from qualified advisers. EQUEX provides no investment advice and makes no recommendation.

Risk of total loss

A minority stake can become entirely worthless, for instance through insolvency, persistent weak earnings, loss of essential business foundations or the departure of key people. In insolvency, shareholders rank behind all creditors; as a rule, no proceeds remain.

Illiquidity and exit risk

There is no regulated market for the shares. A sale requires that a buyer is found and that restrictions in the articles of association (such as approval requirements or pre-emption rights) are overcome. A sale at the desired time or at a specific price may be impossible. Capital is tied up for the entire holding period; this is regularly long-term and cannot be determined in advance.

Buyback programmes create a claim only if contractually agreed, and are subject to the issuer's ability to pay.

Valuation risk

The price per share is set by the issuer and is not formed by a liquid market. It can deviate substantially from any objectively determined value and can be too high. Earlier transaction prices are no evidence of appropriateness. Valuation models rest on assumptions that can prove incorrect.

Minority position and dilution

A minority stake regularly carries no material influence or control rights. Distributions are decided by the shareholders' meeting or the management; without an express agreement there is no entitlement to ongoing distributions.

When new shares are issued, the ownership quota falls unless you participate or subscription rights exist. Preferential rights of later investors can also worsen the economic position of existing shareholders.

Key-person and operational risk

Small and medium-sized companies frequently depend on a few individuals. Their loss, departure or conflicts of interest can substantially impair operations. Added to this are general entrepreneurial risks: competition, regulation, technology, failure of service providers and infrastructure.

Information risk

All information originates from the issuers and is not substantively reviewed by EQUEX. There is no obligation to prepare audited accounts to the extent that applies to listed companies. As an investor you have less review depth than institutional investors. Information can be incomplete, outdated or incorrect.

Specific risks of systematic trading strategies

Where an issuer engages in systematic trading in foreign exchange or other markets, the following additionally apply:

• Market risk: losses are part of ongoing operations. Extended loss phases and substantial interim declines (“drawdowns”) are possible.
• Model risk: rules that worked in the past can fail under changed market conditions. A model does not react independently to structural change.
• Leverage: the use of borrowed capital or margin amplifies gains and losses disproportionately.
• Dependence on third parties: trading platforms, brokers, funding partners and prop-trading providers can change terms, close accounts or fail. Rule breaches can lead to the loss of trading capital.
• Technical risk: failures of servers, connections or interfaces can lead to unwanted positions or losses.

Return figures refer to the past. Past results are no reliable indicator of future results. Live views are deliberately delayed and reduced and provide no complete insight into positions or strategy.

Counterparty and settlement risk

Contract conclusion, payment and share transfer take place directly between the parties. EQUEX is neither an escrow agent nor a payment service provider and cannot step in on non-performance. There is a risk that a counterparty does not fulfil its obligations, or not on time or not in full. Enforcing claims abroad can be laborious and costly.

Legal, tax and currency risk

Companies seated abroad are subject to foreign corporate, insolvency and tax law. Changes in the legal situation can adversely affect the stake. Distributions and capital gains can be taxed in the company's home state and in the state of residence; withholding taxes are possible.

With shares or payment flows in foreign currency there is an exchange-rate risk. EQUEX provides no tax advice; clarify the tax treatment with your adviser before signing.

Conflicts of interest

The operator of the platform and individual issuers can be connected in corporate or personal terms. Conflicts of interest can arise from this, for instance in the selection and presentation of listings or the setting of prices. The operator holds direct or indirect stakes in individual companies presented, or is personally connected with them. Details are disclosed on request.

Suitability and own review

A stake is suitable only if you have sufficient knowledge and experience, can assess the risks yourself, are economically able to bear a total loss, and do not need short-term access to the capital invested.

Diversify your assets; do not put everything on one stake. Review every offer independently and, where needed, obtain legal, tax and financial advice.