On the 27th of last month, news was shared that BuyCellsStandard and Wemakeprice are collaborating to create financial investment products using fractional investment techniques. This initiative aims to support outstanding SMEs and small business owners who, despite having competitive products and ideas, miss opportunities due to the inability to secure funds in a timely manner.
It has been pointed out that this method of raising funds is not different from crowdfunding. While similar to investing funds through crowdfunding, investors might have to assume slightly more risk. Crowdfunding is an investment within the regulatory framework, whereas the product known as Mutual Growth No. 1 is currently outside the regulatory framework. Therefore, its innovation should be evaluated based on the expected returns.
Regardless of whether the investment is in crowdfunding or ST (security tokens), the method may not be as important as how to discover excellent products through new methods and manage profits to provide investors with new investment opportunities. This is because innovation should be assessed based on these criteria.
If BuyCellsStandard and Wemakeprice plan to invest in SMEs with superior technology or products, it would fall under securities-type crowdfunding. If the investment is in a new product, it implies investing in securities based on the earnings of the underlying asset. According to the announcement, the investment is not in SMEs but in the purchase funds of a sales company called Wemakeprice.
There’s news of launching short-term products with a duration of just 3 months, as opposed to fractional investments that tie up money for ten years. Investors invest in the fractional investment security called Mutual Growth Finance No. 1, and the funds raised are transferred to Wemakeprice, which uses the funds to buy products from sellers on its platform. Essentially, it’s investing in the cost of purchasing goods. Wemakeprice will then sell these products with a certain margin, and if profits are made, they will be distributed among investors, Wemakeprice, and the sellers.
The Chosun Ilbo, referencing instant noodles, instant rice, and diapers as examples, highlighted relatively low-risk daily necessities. If “Mutual Growth Finance No. 1” raises 1 billion won, Wemakeprice would use this fund to purchase items like noodles, instant rice, and diapers, earning a margin of 10% to make a profit of 100 million won, which will be distributed. However, it is not confirmed whether this profit is guaranteed, and details on the distribution of profits between Wemakeprice and investors were not announced.
Investing in this financial product allows investors to exit, or liquidate, their investment in 3 months. If the security declaration of this fractional investment security passes the scrutiny of the Financial Supervisory Service, it is expected that sellers will benefit. This could be advantageous for both sellers and buyers if it results in lower interest rates or higher limits than current purchase fund loans or commercial draft financing offered by banks and other financial institutions. This raises the question: What new opportunities does this present for investors?
The opportunity for the general public to participate in corporate purchase financing and whether the profits from purchase financing can be a reliable underlying asset are considerations. Although introducing competition to a market traditionally monopolized by banks could benefit the real stakeholders, the sellers and buyers, by providing a better financial environment, the viability of this is questionable. Emphasizing the advantage of short-term investment compared to the years-long duration of art investment may seem forced. Regardless, if Wemakeprice misjudges and the products do not sell, investors will face losses. Although small initial investments might distribute almost guaranteed margins, reducing risk, sustainability as an investment product remains uncertain. If the investment amount becomes too large for Wemakeprice to handle, investors essentially end up lending money to or investing in Wemakeprice.
