Beijing Startup Tries to Crowdsource Financing Round on Taobao

Crowdsourcing has become an increasingly popular way to raise money for new ideas in the West, but the concept hasn’t really taken hold in China yet. But that doesn’t mean there’s no desire to crowdsource things. Getting investment can be tough, and one Beijing-based startup called Meiwei Media thought of a novel approach: why not just sell shares of your stock on Taobao? The platform is well-trusted and robust, and while it was designed for selling actual objects, why couldn’t stocks be sold on Taobao, too?

The answer to that question, it turns out, is that doing that is illegal, at least according to the legal experts consulted by China Business News. Public companies must meet with regulatory approval before publicly selling stocks, and private companies cannot have more than 50 stockholders. Meiwei had already racked up 1,191 stockholders when its Taobao operation was apparently shut down, probably because it was offering its stock at rock-bottom prices: 1.2 RMB ($0.19) per share. That may not sound like much, but the company actually raised more than 800,000 RMB ($126,000) this way, though it now seems likely they won’t actually be able to keep it.

It’s not yet clear whether regulators will step in to deal with Meiwei, but searches for the company’s stock on Taobao no longer turn up any responses. Representatives from Meiwei told China Business News that there was definitely “risk” but declined to comment on the legality of the company’s fundraising activity. The company did, however, say, that its other investors would fund a stock repurchase in the event that its Taobao fundraising was declared illegal (which seems quite likely).

A spokesperson from Taobao parent company Alibaba told Tech in Asia that the Meiwei stock had been removed by Taobao:

These types of products are not allowed to be sold on our platform according to our listing rules, and as such have been removed.

(China Business News via Sina Tech)