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Investing with NPEX
Through NPEX you can invest directly in fast-growing medium-sized and large companies. By investing in these ambitious companies, you as an investor can achieve a good return.
You can invest in these companies in two ways via NPEX. You do this by subscribing to an issue or by purchasing on the NPEX stock exchange. The bonds or share certificates can be traded on the NPEX stock exchange after issue. And the entrepreneur? It can continue to grow and realize its ambitions by obtaining financing.
Please see our quotations NPEX stock exchange.
Your benefits as an investor with NPEX
High interest rates on bonds
Shares, funds, bonds and warrants can be traded on the NPEX stock exchange
The securities are placed with Euroclear Nederland
Independent assessment and expert assessment of the companies
Invest together with private, corporate and institutional investors
Access to extensive & understandable information provision
Invest directly in different types of companies
Opening an NPEX account is completely free
Investment products
Bonds
The interest rate on the bond loans issued on NPEX is relatively high. The fixed interest, which is paid monthly, is between 5-10% on an annual basis. The amount of interest depends on the company's track record, financial ratios and other relevant matters. The terms of the bond loans on NPEX are 4 to 7 years. The bonds are tradable on the NPEX stock exchange.
Shares
You can buy depositary receipts for company shares and sell them later if desired. The return on these shares depends on the growth and profit development of the company in which the investment is made. Companies can decide to pay dividends.
warrants
You can buy and sell warrants via NPEX. A warrant is a negotiable financial instrument that gives the right to acquire a certain number of shares at a predetermined price during a predetermined period. A warrant is issued by the issuing institution. A warrant does not give an obligation to purchase the underlying financial instruments. The value of a warrant generally follows the value of the underlying financial instrument.
Investment funds
Through NPEX you can invest in investment funds from various providers. These funds are managed on the basis of a license from the Netherlands Authority for the Financial Markets (AFM). NPEX places all relevant documents and news items on the provider's fund page.
Convertible Bonds
Convertible bonds (also called convertibles) are bonds that can be converted into (certificates of) shares at a predetermined price during the term of the bonds. If the holder of the convertible bond decides to exercise his right to exchange the bond for (certificates of) shares, debt capital is converted into equity of a company.
(Depositary receipts for) shares into which the convertible bonds can be converted are often already listed on a stock exchange, but there are also situations in which a stock exchange listing has not yet occurred. The conversion price can then be related to an interim share transaction or a valuation drawn up by an (external) expert. Upon conversion, a discount is often given on the value of the (certificate of) share thus determined.
The bond holder becomes a (certificate of) shareholder and receives a dividend instead of interest, insofar as this is provided for in the company's dividend policy. In the event of a stock exchange listing, the acquired (depositary receipts for) shares can be sold on the stock exchange. If there is no stock exchange listing, the shares may be sold in the event of a (partial) sale of the company. Convertible bonds are often issued with a nominal value of € 1.000.
Cumulative Preference Shares
A cumulative preference share is a share on which a fixed dividend (percentage of the nominal value) is paid out with priority. Dividends are paid first to preferred shareholders before dividends are paid to common shareholders.
If, after a bad year, no dividend is paid on the cumulative preference shares and ordinary shares, then upon recovery of profits, these cumulative preference shares will still receive dividends for the year in which the dividend was passed (cumulative). Ordinary shares do not give any right to this. Sometimes cumulative preference shares are also profit-sharing. Then, in addition to the cumulative preference dividend, part of the excess profit in any given year is also paid out. This dividend is then not cumulative.
Cumulative preference shares are usually issued in denominations with a nominal value of € 1.000 with a specific term of, for example, 5 or 7 years. After this period, if the company is financially able to do so, these shares are often repurchased at nominal value and then canceled. The investor then receives his investment back. Due to the intended purchase after a number of years, the cumulative preference share therefore somewhat resembles a subordinated bond with a fixed return. However, the risk profile is different due to the equity nature. Cumulative preference shares are usually issued through an administration office, which issues certificates against the cumulative preference shares, which are listed on the stock exchange.
The added value and risk of SME bonds
Why is it recommended to diversify investments?
It makes sense to diversify an investment portfolio. But why exactly?
Suppose that of the 20 listed companies, one company gets into trouble and no longer repays its issued bonds. Investor Jan has invested equally in all bonds of the 20 companies; Jan's loss is then 5%. Investor Marie invested in 1 company, and that was precisely the company that could not make repayments. Marie's loss is then 100%. The chance that it concerns that company is 1 in 20. The expected loss for Marie is 5% * 100% = 5%.
The expected loss for both investors is therefore the same. However, an actually realized loss of 5% often fits within an investor's risk tolerance, a loss of 100% often does not fit within an investor's risk tolerance.
In addition, in general, a greater financial loss results in a disproportionately greater disappointment. That is to say: a loss of 10% is experienced as more than twice as unpleasant as a loss of 2%. This follows from the law of decreasing marginal utility: for example, achieving a 1% profit once also provides less pleasure than realizing a profit of 10% twice.
Then there is a third important reason, and it applies especially to stocks. A measure of the volatility of share prices is the standard deviation of stock price returns. The standard deviation indicates the extent to which values deviate from their mean and is expressed as a percentage. Suppose the standard deviation is 5% for each of the 20 different stocks. Then the standard deviation of the portfolio of those 5 stocks will be lower than 20%. This is because the different shares do not all move to the same extent at the same time: that has a strong dampening effect.
Why SME bonds in a broader portfolio?
The arguments for spreading in numbers also apply to spreading across investment categories: investing in multiple categories improves the risk-return ratio of the total portfolio.
SME bonds can help to diversify the portfolio because they have a different risk profile and return expectations than, for example, shares or large bonds from multinationals. This means that SME bonds add value as part of a broader portfolio (such as savings, government bonds, bonds of large companies, shares of large companies, real estate (including your own home).
What else makes SME bonds special?
Potentially higher returns
Because SME bonds generally offer higher interest rates than government bonds or bonds from large companies, they can contribute to achieving a higher return for the portfolio.
Higher involvement
The involvement in an investment in a company can be greater if it concerns an SME company. For example, the investor has a geographical connection with it or has an affinity with the business activities, and/or attends the investor meetings organized by the companies listed on NPEX.
Impact
By investing in SME bonds, investors can contribute to the financing of small and medium-sized companies that, for example, develop new products or create employment. In addition, by selectively investing in SMEs, it is possible to finance initiatives that distinguish themselves in terms of sustainability. Sustainability is often divided into social, economic and environmental aspects. In addition to financial returns, there are other specific arguments that investors find important. Random examples of companies that were or are listed on NPEX are: De Vegetarische Slager (2015), Perfotec (2020) or Medical Precision (2023).
Risks of SME bonds
It is important to note that SME bonds also specific entail risks.
SME bonds may have a higher credit risk than larger companies. Smaller companies are often more susceptible to (inter)national economic fluctuations or have a more limited product or service offering. This can lead to a lack of liquidity, profitability and/or solvency.
Rising interest rates can also be difficult, especially for SMEs. At higher interest rates they are confronted with higher interest charges, while as SMEs they already pay relatively higher interest rates than larger companies.
In general, but for SMEs in particular, it is not always possible to pass on rising purchase prices and other costs to customers through higher product prices.
In general, loans offered through an alternative financing platform often have a higher risk; the higher interest rate reflects that. This does not alter the fact that, on balance, losses on a portfolio of loans are possible. Recent economic developments have been characterized by lower turnover in certain sectors due to the corona pandemic, repayment of corona support, deferred taxes, high inflation (high purchasing and energy costs) and rising interest rates. Statistics Netherlands states that there will be 2023% more bankruptcies up to and including November 56 than in the first 11 months of 2022. This applies to all companies, and not just to the even more cyclically sensitive small and medium-sized businesses.
Read the documentation
SME bonds fit into a well-diversified portfolio. They often have a relatively high coupon. However, that is also compensation for a higher risk. Read the documentation and investigate whether you think the coupon is appropriate for the business activity, potential growth or profitability of the company. It also provides insight into how the company performs on sustainability factors. Attending (online) presentations of the companies is always fun, interesting and educational. In addition, it is advisable to take note of the annual figures, half-yearly figures and interim reports that listed companies publish on the NPEX platform.