Investment in IP commercialisation company

Investment Questions and Chats Stocks
#1

Assalaamu alaykum all,

This is a re-post of a question I put under the ‘general investment’ section. Haven’t got any responses there so trying again here

I am invested in an Intellectual Property (IP) commercialisation company. In summary, the business model is:

  1. Identify university IP with high commercial potential
  2. Create start-up companies based around the IP in exchange for equity stakes (not cash)
  3. Validate technology and scale up in partnership with industry
  4. Raise third-party funds for further development
  5. Realise gains on equity stakes

My question relates to step 4. Funds are raised for the investee companies in 2 main ways:

a) Equity fund raises which the IP commercialisation company may participate in itself along with third-parties
b) “Bridge” funding in between equity fund raises which typically involves a loan provided by the IP commercialisation company to the investee company

The bit I only recently became fully aware of and am now unsure on with regards to shariah compliance is point b) above.

The loans given out are usually interest-bearing (although not always if the loan is small). Furthermore, it appears that the loans have a convertible feature which the company can use to write-off the debt in exchange for an increased equity stake in the investee company. The company has used this conversion facility on more than one occasion.

I’ve done some calculations around the extent of these interest-bearing loans. With some conservative assumptions, I have concluded that:

  1. Interest income <5% of total revenue (the standard AAOIFI check on haram income)
  2. Debt investments, i.e. the aforementioned loans, <5% of the total fair value of assets (i.e. the fair value of equity stakes the company holds plus cash is far greater than the value of its debt investments)

So finally to my question: Does the act of providing interest bearing loans in and of itself make this IP commercialisation company a shariah non-compliant investment or does the low level of these loans when measured on both revenue and total assets make it compliant? (Assuming all other factors check out such as the nature of the investee companies).

Would really appreciate some advice on this.

Thanks

PS I’ve already checked the Zoya app and it says this stock is shariah compliant. I’m not sure how smart the app is though and doubt it looks at business specifics as described above.