We have created an options analysis and short-term action plan that describes the different types of crowdfunding that could be used to support the skifields on Mt Ruapehu.
Crowdfunding Options Analysis
The crowdfunding options summary describes the different types of crowdfunding and analyses the legal limitations on each as they relate to the current situation for the skifields:
In summary, there are three types of crowdfunding:
Donations involve giving money with no expectation of a reward or benefit in return.
Rewards crowdfunding involves contributors donating money in exchange for a product or service.
Investment crowdfunding involves investing money in a project or venture in exchange for an equity stake or profit sharing.
The options analysis goes through the legal structures, consequences and timing for each type of crowdfunding and how they could be used to support the skifields on Mt Ruapehu across the short, medium and long term.
Crowdfunding Short-Term Action Plan
The short-term crowdfunding action plan is focused on the next steps necessary to support the company's short-term liquidity situation:
The above documents have been shared directly PwC as Voluntary Administrators and discussed with them. However, they have not provided feedback as to whether any of the proposed mechanisms for community involvement would be acceptable to them or to the major creditors. There has also been broad feedback from various stakeholder groups on the crowdfunding proposals which has raised some common questions.
Crowdfunding Frequently Asked Questions:
Why is community-ownership preferred by the crowd vs corporate ownership? Mt Ruapehu is a National Park with a limited operating concessions for commercial activities. The high level of risk associated with the active volcano, variable snow levels and short seasons mean that the skifields may be unable to generate the short-term excess cashflow necessary to provide a dividend to a large corporate investor. A single large investor would have too much decision making power over an asset so critical to an entire region. Having a large owner also makes the skifields a secondary interest to whatever other business assets the large investor also controls. The skifields are too important to the community to be just another ledger entry on a corporate portfolio. Community ownership would allow for a greater diversity of voices to be heard. It also aligns the interests of various groups with an interest in the mountain.
Why is a non-profit structure preferred by the crowd vs a for-profit? The non-profit / compulsory re-investment setup for the skifields ensures that all excess revenue is put back into maintenance and on-mountain improvements. This is important for the long-term operations of the business because of the harsh environment and the need to re-invest for long-term growth. A short-term for-profit structure would naturally seek to profit maximise by cutting costs and even potentially running down the assets (in particular prior to each concession renewal). It's hard enough to keep the skifields running without the drain of trying to pay a dividend large enough to justify the risk of the investment. Technically, the dividend re-investment structure would also be compatible with a long-term 'capital gains' view of the skifields where the share price grew gradually (based on the long-term performance of the skifields).
Can the skifields offer shares along with life passes? Having shares tied to a product or service can create complicated legal issues to do with fringe benefit taxes and the 'value' of the shares. Some shareholder benefits are certainly possible (many publicly listed companies have shareholder only discounts etc). But these need to be optional so they don't become a contingent liability for the company. Hence 'stapled' products with shares can get complicated. That said, aligning customer loyalty and company ownership is exactly the mindset we want for the skifields going forwards.
Could a short-term donations or rewards crowdfunding process promise shares in the future? Promising shares in the future to a donor now would basically be the same as offering them shares now. In which case the proper rules for equity crowdfunding would need to be followed. Those rules are fairly straightforwards but the investment process can take time to organise. Donations and rewards campaigns are faster to get set up.
Why are the investment crowdfunding plans limited to $2m per year? The Financial Markets Conduct Act and Financial Markets Conduct Regulations limit the amount of share capital that can be raised by a company in any 12 month period through Equity Crowdfunding to $2 million. Using a platform that allows retail and wholesale investors to invest simultaneously can allow a total capital raise of more that $2m at once. But it's usually safer to plan on sticking to the $2m limit when forecasting future capital raises from the general public.
There are multiple types of crowdfunding and multiple organisational structures that could be made to work for the future of the skifields. The key to all of the potential crowdfunding approaches is to encourage transparency, accountability and respect for the mountain itself and the interconnected mountain communities of people who love the mountain.