Micro Connect launches market structure for SMEs

Micro Connect (H.K) Investments Limited made waves in the financial sector yesterday with the launch of its innovative market operating structure, the Micro Star, under the Micro Connect Macao Financial Assets Exchange (MCEX). This initiative aims to create a more inclusive and accessible capital market, particularly for micro and small businesses worldwide.

The Micro Star represents a significant leap forward for MCEX, which is recognized as the world’s first licensed revenue-based financing (RBF) exchange.

This new market structure is designed to mimic traditional equity markets while introducing three key innovations: a digital market structure, a distribution-driven market, and a dividend-based trading model.

During the launch yesterday, Charles Li, founder and chairman of Micro Connect expressed his confidence and expectations for MCEX’s revenue-sharing market.

“Just like the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, and Bond Connect, MCEX represents another capital market bridge between China and the world,” he said.

“As a new capital market, it will take time and patience for development, but we firmly believe it will soon become one of the most important financial infrastructures in China’s financial markets,” Li added.

Digital Market Structure

The first innovation is the establishment of a digital market structure that simplifies access for small businesses. By digitally replicating essential features of traditional markets, MCEX has created a system that is lighter and more cost-effective. The Micro Star operates through five core components: Revenue Based Obligations (RBOs), Single Portfolio Vehicles (SPVs), Segregated Portfolio Accounts Collectives (SPACs), Exchange Traded Facilities (ETFs), and Revenue Based Units (RBUs). These components are designed to streamline operations and enhance efficiency for micro and small enterprises seeking capital.

Distribution-Driven Market

The second innovation focuses on a distribution-driven market that mandates issuers to distribute nearly all their revenue as cash payouts on a monthly basis. This requirement significantly lowers barriers to entry for smaller businesses while ensuring robust investor protection. Unlike traditional equity markets, which often rely on high valuations and liquidity, MCEX emphasizes high dividend payouts and precise disclosure of future distributions. This approach not only fosters investor confidence but also enhances the predictability of returns.

Dividend-Based Trading Model

Finally, MCEX has introduced a dividend-based trading model that allows SPVs to raise capital incrementally. This model enables businesses to start with smaller investments and gradually increase their funding as they establish a solid track record of revenue distributions. The introduction of repurchase agreements (repos) further facilitates this process by allowing SPV sponsors to buy back units at predetermined thresholds, thereby minimizing dilution and enhancing investor trust.

“This marks a historic moment for micro and small businesses,” said Micro Connect’s Li.

“We are excited to welcome our first listings of 39 SPVs and 25 SPACs, which include diverse enterprises from consumer retail to e-commerce across various regions.”

MCEX aims to serve as a bridge connecting global capital with China’s vibrant micro and small business sector. The exchange has already facilitated over RMB 4.4 billion in investments across more than 13,000 merchants in over 200 cities since its inception.

As MCEX embarks on this ambitious journey, it seeks to redefine how small businesses access capital while offering investors new opportunities in an evolving financial landscape.

Li concluded by stating that the launch of the Micro Star is just the beginning. “We envision MCEX as the listing venue of choice for micro and small businesses globally,” he said. “Our goal is to create a beacon for capital that guides investors toward new horizons in this untapped market.” Nadia Shaw