Platform Lending’s Unhappy Romance With Early Mainstream Investors

Here’s some of the fallout from the IPO of platform lender, Funding Circle, as reported by our friends at AltFi.

US asset management giant T. Rowe Price has built at 7 per cent stake in Funding Circle following an all-time low for the marketplace lender’s share price. 

Rowe Price, which is also a very significant investor in Tesla alongside many of tech’s largest names, bought the stake earlier this week when shares were around the 72p level, having not previously owned shares in the firm.

Source: Google

Funding Circle’s share price has headed south since its listing at 440p in October 2018 and is now at an all-time low of 70p, representing a more than 80 per cent fall. 

The firm has been hit more recently by weakness across global stock markets as concern builds for the global economy’s resilience to the spread of the coronavirus. However, its fall from a valuation of £1.5bn at its initial public offering (IPO) has also been interpreted in some quarters as representing concern for fintech valuations in general and alternative lending in particular. 

Here is some of the commentary we offered on the IPO back in the day. Note the kicker: “We didn’t buy any stock, and certainly hope you didn’t either, gentle reader.”

The argument that the IPO was overpriced, set management over-ambitious growth targets, and mainly benefited the investment bankers (and those staff who were allowed to part with their shares right after the IPO) – well, it just gets stronger.

Funding Circle’s share price at the time of writing is currently 54 pence…

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £19 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.