Buy stock in three clicks... on Facebook?

Stock market investing could soon be as simple as buying a book from Amazon, according to a US start-up that envisages people being able to buy stock directly from public companies, via Facebook.

“We believe getting everyday people back into the markets is an antidote to many of the economic dislocations created by Wall Street,” says chairman and CEO of the start-up Loyal3, Barry Schneider.

Schneider's company has developed a Web and social media platform called 'Customer Stock Ownership Plan' (CSOP), with the vision of enabling public companies to sell their stock directly to customers.

Using their credit, debit or online bank accounts, Schneider says customers will be able to buy stock “as easy as they buy products,” avoiding broker fees.

Apart from a Web platform, Loyal3 has also developed a Facebook app that will allow users to buy and sell shares on the social network “with just three clicks”.

“Some institutions would have you believe that individuals cannot invest without a financial advisor or sophisticated analytical tools. We believe that very supposition has led to a proliferation of fees and a historic deterioration of personal asset values,” says Schneider.

The CSOP platform allows people to buy stock with a minimum of a $10 investment. “Since most companies have stock prices higher than $10 per share, CSOPs provide participants partial shares, known as 'fractional shares'. Rather than being required to buy whole shares of stock, you're able to buy dollar amounts that fit your budget,” says Loyal3.

Testing of the platform began in June last year, after Loyal3 signed its first partnership with Nasdaq. According to a New York Times report from that time, Nasdaq had signed up to offer its shares to investors via CSOP, while also offering the service to its listed companies.

Local equities analyst at Vestact, Byron Lotter, says he is not surprised by Loyal3's business model. “There is no doubt that investing is continually getting easier,” says Lotter, adding that an example of this is Standard Bank's Online Share Trading platform. Lotter also says brokerage firms are continuously lowering their fees.

“We've also seen payment systems become easier and more accessible. So, as long as things are kept safe and transparent, then I don't see why not.”

However, Lotter warns that a platform such as that of Loyal3's on Facebook, may be difficult to control, and money laundering and fraud will always be of concern.

“While these processes continue to become easier, people should still think very carefully before investing their money in stocks via Facebook. It's still their hard earned cash.”

Loyal3 says its platform will go live in the second quarter this year, and will initially only be available to adults residing in the US.