Assalam Alaykum,
did anybody come across a ruling(s) tackling the case of investing/trading in pre-revenue companies? if so, please share.
wa assalam.
Just follow the normal aaoifi guidelines
- no haram sector
- conventional debt/market capitalization no more than 30%
- interest bearing cash and interest bearing assets / market capitalization no more than 30%
If market capitalization is not available you can use total assets as per the Malaysian sc sac screening criteria
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how would you apply the AAOIFI standards - designed for established companies in my opinion, or any standard for that matter- to a company like QS, which has $0 operating revenue in its income statement? let alone biotech companies.
if you came/come across a specific ruling, please share.
These are the same standards used for all companies. Whether the company has zero revenue or even negative revenue does not require a different standard. The main issues regarding the business sector and the balance sheet considerations still hold.
You can draw an analogy with a normal partnership - is it allowed to enter into a partnership whose purpose is to do something haram or which actively is involved in riba (giving through interest bearing loans or taking through interest bearing investments).
The issue of revenue is a way to look at the overall business. If the haram revenue is more than 5% of the total revenue it is considered haram to even invest in the company while if it is less than 5% then you can invest subject to the other ratios and subject to purification of that amount as per the aaoifi guidelines.
Please see standard 21 for more details
And Allah knows best.
Ashraf Gomma ali
http://linkedin.com/in/ashrafali
first off, jazak’Allah for taking the time to answer.
to be specific and use the example of QS (many companies fall in this category): if it is haram to invest in this company: why? if it is halal: why?
Financials: QuantumScape Corporation (QS) Income Statement - Yahoo Finance
JAK