Hamburg-based New Shore Invest launches a digital platform for ship-financing. It offers retail investors equity-based limited partnership shares through Security Token Offerings (STOs).
The new platform is expected to revive the German KG Model of ship financing, a top source of equity for ship owners and a billion-euro market prior to the 2008 financial crisis. The idea is to group investors as equity holders to finance single ships through Security Tokens.
The German KG Model, in digital form
The New Shore platform, similar to the KG model, will facilitate and structure limited partnership shares of single ship companies. Investors will get an Ethereum-based token for every share. Token holders are equity investors, entitled to dividends, and they fully participate in the profits of any vessel being sold.
One token is a representation of one euro’s worth of share capital. This includes all the corresponding rights and obligations, with reference to the articles of association in the single ship companies.
New Shore Invest is targeting projects that are expected to generate an IRR of 7% and more. Under the German tonnage tax regime, this makes the investments basically tax-free for the investor.
The platform is geared towards the mass investors market, such as stock and bond investors, and start at a low minimum deposit of EUR 1,000. “Because shipping is a risky investment, we had to break down the investment tickets to a minimum of EUR 1,000 in order for people to be able to diversify their portfolio and open up the market”, Richard Heuser, one of the founding partners of New Shore Invest, explains.
The digital twist to traditional financing
New Shore built its own administration software to service the offer. Through the online portal, investors can track their investments, participate online in general meetings, and pass shareholder resolutions without having to attend physically.
“The advantage of online marketing is that we can reach out to hundreds of thousands of potential investors,” Heuser says.
The full impact of this form of financing on the German market and economy as a whole remains to be seen. However, New Shore Invest, with the support of Oslo-based NorthCape Capital which will provide the Seed capital, has put together a promising endeavor that seeks to fill a notable gap in the German maritime industry.
Importance of Ship Financing in Germany
Between 2000 to 2010, Germany was one of the most prominent shipowning nations in the world. This was driven by an influx of capital towards building new ships, thanks to the KG model that became popular around 2004.
However, the 2008 global financial crisis significantly whittled down the German one-ship KG market. As other countries, such as Korea and China, began filling in the market gap with their own ship financing schemes, a stimulus is needed to put the excitement back into Germany’s ship financing sector.
There is a lot to look forward to in this respect. As explained by New Shore Invest, “The current ship market is in the phase of retiring older ships and improving fleet utilization. In the general cargo segment, in particular, little investment has been made in new buildings in recent years. “
“The falling number of transport ships favors the better fleet utilization of the existing ships, which comply with the latest environmental regulations. In addition, new shipbuildings are required in this segment in order to efficiently counter the forecast increasing maritime trade.
The current market situation is therefore particularly favorable for investors since with an investment via New Shore Invest they can benefit from the likely increase in charter rates and possible increases in the value of the ships.”
A staggering 90% of world trade takes place by sea. Shipbuilding is a vital national infrastructure asset for Germany, as it would provide a huge competitive advantage with regards to linking German products to the rest of the world and bringing global goods back to the country. Thus, the market pre-requisites for a digital ship financing platform seem promising.