Make.V to return funds within 2 months

Media startup Make.V told the Global Times Thursday that its fundraising through China's leading C2C e-commerce platform taobao.com has been deemed illegal by China's top securities watchdog, and it has pledged to return all proceeds thus raised to individual investors within two months.

The company is a limited liability company and not qualified to collect money from the public according to the China Securities Regulatory Commission (CSRC), Make.V said in a statement dated Wednesday.

"We will obey the CSRC's decision and return all publicly collected funds via Taobao and in other ways. From now on only funds from venture capital institutions are welcome," Zhu Jiang, CEO of Make.V, told the Global Times Thursday.

Only companies that get permission from the CSRC can raise funds publicly, since it is risky for people to invest in unsupervised ventures, Liu Shengjun, deputy director of the CEIBS Lujiazui International Finance Research Center in Shanghai, told the Global Times Thursday.

Zhu noted that this will neither influence the company's development nor harm institutional investors, given the small scale of the individual investments.

Make.V started two rounds of online fundraising between January 8 and February 3, allowing anyone to subscribe to its shares by buying "membership cards" on Taobao. This brought the company about 380,000 yuan ($61,000) from some 1,591 individual investors, but also aroused domestic allegations of violating Chinese securities laws.

The company also received 2.6 million yuan through private placement from nine institutional investors from Zhejiang, Jiangsu and Shanxi provinces, Zhou said.

Liu noted that when a domestic company promises to pay a certain amount of interest to its investors within a certain time period and the number of subscribers reaches over 50, it is considered illegal fundraising according to Chinese securities laws.

Liu said that he does not expect China's regulations on online fundraising to be relaxed anytime soon.

Make.V has already returned 210,000 yuan to the individual investors, and still needs to return the remaining 170,000 yuan, Zhu said.

According to the company's investor prospectus, it expects to gain 60 million yuan and pay dividends of 0.3 yuan a share by the end of 2013 via its two television programs, which have been scheduled to air in the spring.