The companies listed on Newchip are typically privately held companies, and their shares are not traded on a public stock exchange. As a result, the shares cannot be easily traded or sold. As an investor in a private company, you typically receive a return on your investment under the following scenarios:
- The company gets acquired by another company.
- The company goes public (undergoes an initial public offering on the NASDAQ, NYSE, or another exchange).
- You invested in a revenue share note or debt note that has a set payment schedule and ROI.
It can take years to build a successful company, and in many cases, there will not be any distribution (return) as a result of business failure.
Roughly 50% of our listings are equity-based while the other half are debt and revenue sharing investments. Revenue share and debt notes don't guarantee an ROI but they typically have hard assets backing them and set payment schedules for investors that like a check every month.
Return on Investment Basics (ROI):
How you get a return from an investment can vary from investment to investment and it would be best to read the offering documents for the particular investment that you are interested in.
For example, when you invest in an equity-type of offering, you own a piece of the company. It can be years before the company grows and the share price (or stock price) is worth more. When this occurs, you can then sell your shares/stock that you have in the company.
On the other hand, if you invest in a debt-type of offering (where you essentially loan the company money), it could be structured in a way where they start paying you back in a year or so (sometimes less, sometimes more).
Often investors put all their eggs into a single basket (company) because they believe it will be a unicorn, whereas the chances of it happening are just as rare as the mythical beast appearing in our office.
The key to investing is diversification.
Private equity and alternative investments are risky and should only be invested in as part of a diverse portfolio to distribute risk and returns across multiple investment types and sectors.