SA credit marketplace RainFin has sold its corporate debt marketplace offering to Johannesburg alternate exchange 4AX, while acquiring a stake in the latter company.
The deal was announced yesterday (4 April). Rainfin, which has been involved in crowdfunding since 2012, introduced its facility by which consumers are able to lend to corporates in December 2016. The company will retain its lending marketplace for individuals as well as to small businesses.
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In a phone call with Ventureburn today (5 April), Rainfin co-founder and CEO Sean Emery said the two companies had spent the past year working on the deal.
RainFin approached 4AX after the exchange announced plans to launch a debt market
“There were a number of things we had to take into consideration,” Emery said, adding that with 4AX having acquired a license to operate as a stock exchange, it “had taken a long time to figure out the perfect synergy”.
He declined to disclose any specifics of the deal, particularly how much Rainfin had sold its debt marketplace for as well as how much equity stake his company had acquired in 4AX.
However, he hinted that because of Financial Services Board (FSB) regulations, no shareholder within 4Ax can hold more than 20% of the company.
Rainfin, he said, had approached 4AX about the deal after the latter announced plans to launch a debt market.
He said Rainfin will now shift to focus to financing small businesses (which it has been doing in the past) particularly “smaller companies that are not ready to be near a marketplace”.
‘SA debt market inadequately serviced’
The licence that 4AX has allows it to provide both equity and debt financing. The company’s acquisition of Rainfin’s corporate debt marketplace means 4AX is now able to offer its clients the ability to source debt directly from a combination of retail and institutional investors in one seamless and integrated offering.
In a statement on Wednesday (4 April) 4AX CEO Fay Mukaddam said the country’s debt market is “inadequately serviced”, adding that this issue is not unique to South Africa.
“The conclusion of this transaction will allow 4AX to build on the concept of crowdfunding, and a credit marketplace platform pioneered by RainFin, and significantly enhance that by bringing the offerings into a regulated world through alignment of the debt instruments issued by the RainFin platform and our listed regulated exchange,” Mukaddam said.
She added that the exchange is focused on “offering a real alternative for corporate, treasury and other debt instruments and products”.
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