Several months ago, we wrote about a Beijing-based startup called Meiwei Media that raised more than 800,000 RMB ($126,000) by selling shares of its stock on the Alibaba C2C e-commerce platform Taobao. At the time, legal experts said it was probably illegal, and indeed Taobao moved quickly to shut down the sale, but Chinese regulators hadn’t actually made a ruling one way or the other. Now, they have.
Last Friday, China’s Securities Regulatory Commission (CSRC) announced at a press event that the rather innovative approach to fundraising is, as many had speculated, illegal. Yesterday, Meiwei told the Beijing News that it was in the process of returning all the money it raised back to the people who had paid it.
It’s the end of the road for crowdsourced fundraising on Taobao, but the willingness of people to buy stock through the platform — not to mention how much attention the approach got in the media — indicates that Chinese consumers might be interested in a crowd investment platform that would allow startups to raise small-scale investment rounds.
The demand is clearly there; whether the CSRC would be willing to permit the existence of such a platform is another question entirely, though. Chinese securities law prohibits the public sale of stock in any company that hasn’t been approved by authorities, so any crowd investment platform would need quite a bit of government cooperation if it wanted any hope of succeeding. In the short term, it certainly seems like Chinese startups are officially out of luck as there’s currently no legal way to raise funds via crowdsourcing.
(Beijing News via TechWeb)
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