ASIC halts crowdfunding campaign for Hirehood amid share type concerns

Corporate regulator the Australian Securities and Investment Commission (ASIC) has issued its first interim stop order over a crowd-sourced funding (CSF) campaign.

ASIC intervened in the raise for Hirehood, an hire marketplace for holiday items such as surfboards, bikes and baby equipment, on the VentureCrowd platform.

The regulator’s concern is over the structure of shares issued to potential CSF investors. It’s ASIC’s first use of its stop order powers in relation to a CSF offer under the Corporations Act.

ASIC took action in relation to Hirehood’s use of a nominee arrangement for shares for CSF investors, who were asked to make a minimum $500 investment at $4.53 a share. The company had $10,500 in commitments on a minimum of $100,000 when the campaign was halted on Wednesday morning.

The interim order is in place for 21 days unless revoked earlier.

The regulator said arrangement did not permit investors to directly acquire ordinary shares in the company. Instead, the Hirehood shares were intended to be held by a related party of the intermediary, as nominee on bare trust for the shareholders.

For an offer to be valid under the current CSF regime, only fully paid ordinary shares can be offered, ASIC said.

“Hirehood’s nominee arrangement resulted in investors holding only an equitable interest in the fully paid ordinary shares, rather than full legal and equitable ownership rights normally associated with the ownership of ordinary shares,” the regulator said in a statement about the interim stop order.

“ASIC also took action as the offer document did not comply with the minimum content requirements prescribed in the Corporations Act and Corporations Regulations 2001, which includes providing sufficient detail about the issuer’s business model.”

The value and fine print on shares in CSF offers came under increased scrutiny recently following the acquisition of Sydney bike helmet tech company Forcite, which was acquired by Nasdaq-listed camera business GoPro in January this year.

Business News Australia reported that CSF investors who backed Forcite took a nearly 90% haircut on the deal, while other investors booked a gain.

Forcite raised $1.3 million at 23 cents a share on Equitise in early 2022 as part of a $5.5 million Series A at a $24 million valuation.

But when the sale to GoPro went through, reportedly at more than $20 million, the CSF investors were offered just 2.9 cents per share, a loss of around 87% on their investment.

Hirehood launchedin August 2023, and says its customer base has grown by an average 20% month-on-month. The business was valued at $2 million.