A new European tech fund makes donations to non-profits by giving shares.
Bruno Giussani | September 2008 issue
Richard Bernstein, the CEO of London-based Eurovestech, a fund investing in tech startups in Europe, has figured out an intriguing new form for making donations to non-profits: giving shares. The principle is simple. Instead of donating cash, Eurovestech—publicly listed on the London Stock Exchange—issues new company shares in batches of 100,000 and gives them to charitable organizations. The organizations can sell them pronto or wait for a spike in their value. From Eurovestech’s point of view, it costs a fraction of giving the same amount in cash. For the recipient, it’s big money with a potentially interesting upside, depending on the shares’ value evolution.
There is, however, a “hidden” cost: dilution. Simplifying, that means every time the number of shares of Eurovestech grows, each one is worth a bit less. A tiny bit less, actually: A hundred thousand extra shares are almost negligible compared to the 344 million shares that comprise Eurovestech’s capital. “I believe that a dilution of 0.2 percent per annum is absolutely invisible. It’s basically a rounding error,” Bernstein says.
Over the last seven years, his company has donated 8.2 million ordinary shares to more than 70 charitable and non-profit organizations, amounting to a stock market value of almost $3 million. And Eurovestech is just a small company. But Bernstein wants to encourage other companies to do the same. He’s done the math: “If all the companies on the FTSE-100 gave 0.1 percent of their shares every year, that would amount to almost 1.8 billion euros [nearly $3 billion],” he says. “Now apply that to all the other companies listed on all the other stock markets.”
Bernstein has already convinced other companies to follow his lead—one of which has recently allocated almost
$1 million in shares to charity. He’s now setting up an organization, Share And Share Alike, to promote this approach, centralize share donations and distribute them. He hopes to be able to convince companies throughout Europe and beyond to start donating shares. “I’m ready to go to see any CEO in any company anywhere in Europe to explain how it works and show how simply it can be done from the company’s point of view,” he says.
Legally, he adds, for listed companies, this is easily done. The board has the authority to issue shares. The decision must be communicated to the markets and filed according to regulations, but that’s pretty much all that’s required. Although legally this isn’t necessary, some company leaders may choose to get shareholder approval at the annual meeting, making it a shareholder-approved policy. Says Bernstein: “I want to get to the point where it’s embarrassing for a company not to be ‘sharing alike.’”
