Financial Ombudsman and Crowdcube's response to the Emoov Fiasco - Nothing to do with us mate

This is a disgrace but it is also exactly what we predicted Crowdcube would say. Thank you to the investor who forwarded this and who is now a member of ECF.Buzz - so it wont happen again. Shame on you Luke Lang and Darren Westlake - 

Dear xx

Thank you for your email, which we will consider and respond to as a formal complaint. 

We understand and share your disappointment at the outcome for Emoov investors. However, as we underline on our platform, there is a very real risk when investing in startups and growth companies. As always, Emoov’s pitch was reviewed according to our due diligence charter, and approved as a financial promotion.

Any claims made on the company’s pitch on Crowdcube, including the financial section of the pitch, were subject to our standard due diligence and were therefore verified with evidence before being approved as a financial promotion. Any additional claims made outside of the pitch or post the raise on Crowdcube, would not be verified or approved as a financial promotion by Crowdcube. 

In the cooling off email that was provided to all investors prior to the capture of funds, the company reduced its valuation and confirmed that they would require additional funding. Investors were able to withdraw their investment during that cooling off period.
You can access our Due Diligence Charter, which is public on the Crowdcube site, here. 

It’s always disappointing when a business doesn’t succeed but please be assured that we will be liaising with the administrator over the coming weeks and we will provide further updates to investors when possible. 

Please consider this email as our official response to your complaint. If you feel we are unable to rectify your complaint to your satisfaction, we would like to make you aware of your rights to escalate your complaint to the Financial Ombudsman Service at the below details:

Financial Ombudsman Service
Exchange Tower
London
E14 9SR
website: www.financial-ombudsman.org.uk 
email: complaint.info@financial-ombudsman.org.uk 
phone: 0800 023 4567 or 0300 123 9123

Unbelievable. 

Emoov goes into Administration taking down its staff and shareholders as a goodbye Christmas present.

This Emoov fiasco is some serious caca. And we dont think the directors who managed to persuade so many Crowdcube investors to pile money into the company on the back of some watery promises will have heard the last of it.

This is one of the worst suicide notes we seen in recent times - it starts by making the false assumption, that the directors were entrepreneurs. I can think of words to describe them, but entrepreneur is not on the list - 

"They say that entrepreneurs should never give up. But at the same time one needs to know when efforts have been truly exhausted and when you simply have to call it a day.

"Regretfully and despite my significant endeavours over this weekend to achieve such, the prospective purchasers that have been in the wings have not come through with viable offers to acquire the Emoov business.

"In good faith, my absolute quest over the past few weeks has been to secure the future of Emoov under a new owner in order that staff and customers would have continuity and certainty. Sadly, that is not now to be.

"At 1pm today [Monday December 3] I held a call with Emoov board members where it was agreed to appoint James Cowper Kreston as administrators. Once this intention is filed with the court later today they will take charge of the affairs of the company and its staff, customers and creditors and will work to secure an ultimate buyer.

"Today is a truly sad day - but at the same time I am sincerely grateful to you all for your support, your loyalty and your hard work over the nine years since I founded the business. I'm especially touched by those that have attended the office and that have continued to work with me over the last few days in spite of the dark clouds that have gathered of late.

"I am also extremely grateful to specific shareholders such as Simon Murdoch of Episode 1; Gaby Salem of wharton Capital; and Alexander Lazarev of Maxfield Capital whom have been of immense support and professionalism since investing and in the last few weeks and months, fighting with me to preserve the company.   

"We built a business together that made positive noise, punched well above its weight and sought to make the home buying and selling experience better. We commanded a position as a well recognised thought leader and commentator and that led with a customer first, value led, tech enabled proposition. I'm proud of that and I am proud of all of you on that journey as the integral part of it. Our tech, systems, brand, TV ads, profile etc were all important components - but the team remains THE most important aspect by far. This is often underestimated by others. 

"So, thank you. But above all, I'm so sincerely sorry that it has come to this. 

"Peter Whalley and Tom Russell at James Cowper Kreston will be in contact and will guide you through the important aspects of the next steps." 

Bottom line is if buyers had been in the wings and the business was worth what he told us it was , they would have bought. BS only sticks for so long, no matter how much you throw at the wall. Crowdcube investors were told certain things that have turned out to be less than accurate. Crowdcube need to step up and explain how that could happen. The FCA need to step up and explain how they allowed Crowdcube to let that happen. Of course neither will do a thing. They never do. 

We wrote about this here when they announced they were going to 'sell'  the company. The only sensible thing that has come out of this is that this company couldnt be sold. You have to ask why. 

The Crowdcube Emoov second raise - just a few months ago for £1.8m, means that Crowdcube has enabled this shambles to raise £4.4m from the public. Just 2 months or so ago, Crowdcube were happy to enable this company to sell its equity on their platform at a valuation of £100m. £100m. And we warned you all not to invest. Is it right that Crowdcube get to keep their commission whilst their investors get shafted and the Emoov staff spend Christmas unemployed? Where is the justice in that?
Yet another reason why ECF Buzz needs to be launched - join up here if you want to do something -https://www.indiegogo.com/projects/ecf-buzz-the-crowd-investors-information-centre/x/19804529/

Crowdcube's Emoov disaster was well signposted for anyone with their eyes open.

You dont have to dig far to find people telling you that Captain Quirk, CEO of the startship Emoov, is a bit of a fantasist. We supply below some links etc. In future, when we have our new site up and running,  ECF.Buzz, members will be able to use our research to find these things out before they invest.

So in the same week that Crowdcube are due to launch their latest funding round, based on the a lot of selective PR, we can tell you about Emoov, which raised £1.8m in September 2018 and another £2.6m in 2015. The company is now in considerable financial trouble (Quirk out) and has put itself up4sale. The 2018 Crowdcube investment at a £100m valuation now seems to be a galaxy away from reality.

Read the comments from the following.....................

Try this - from 2017

www.propertyindustryeye.com/emoov-boss-hopes-to-be-on-stock-exchange-and-have-5-share-of-entire-estate-agency-market-within-five-years/

Or this - from 2018

www.propertyindustryeye.com/emoov-to-close-crowdfunding-campaign-early-after-nearly-800-investors-chip-in/

This -  from 2015

businessadvice.co.uk/finance/equity/how-i-ran-a-successful-crowdfunding-campaign/

There is plenty more.

Dont forget to sign up to our new service next year - then you can avoid the more obvious howlers. 

Emoov, sadly going where no investor has been before....................for good reason.

Emoov may well turn out to be the end of Crowdcube. The company raised £2.6m in 2015 on the platform. It then merged with two other loss making online estate agents this year and on the back of a promised IPO, was allowed to raise another £1.8m on Crowdcube just 2 months ago. Now it is toast - albeit toast that is for sale. So what is it worth? Certainly not the £100m Crowdcube investors paid 60 days ago. 

We warned you all.......again. We knew about this a while ago but didnt want to prejudice the sale process by writing it up. Now it's hit the headlines. We had a sad email from an investor who says he has lost a large sum of money and that that is the end of equity crowdfunding for him. Well done Crowdcube.

The latest Emoov Crowdcube pitch has been 'taken down' by the platform to save some of their blushes but we wrote about their merger and the new campaign here. What investors were being told about the state of the company does not now appear to be quite true - ring any bells?

The captain of this ship is now saying that the cash runway has ended - that's 2 months after raising over 150% of the cash they asked for on Crowdcube. Yet another one for the good book - Russell Quirk (no typo) for the record. Quirk is reported by the FT to have said that the business ran very well for the last 8 years. That's the same business that has collected losses of over £10m. Yup that is some success story and we have not even seen last year's accounts yet. 

He can be seen here at end of the recent Crowdcube raise thanking people for all their cash - sends shivers..................

In a piece in the FT  - here, the same Quirk is now saying all this cash has run out. I would be surprised if anyone could find a more glaring example of gross mismanagement of anything, anywhere in this whole bally world.

Reports say that Northern and Shell, a major backer according to Emoov, failed to come through with the funds - leaving Crowdcube investors as the only source of new money after the merger. Who would have guessed that?

This is what Luke Lang had to say about the second Emoov Crowdcube raise -

We’re delighted to welcome our good friends at Emoov back to Crowdcube’s platform for this next raise, as the company continues to innovate rapidly in the property space. Emoov made a highly successful raise on Crowdcube in 2015, providing £2.62m of growth capital to help fund expansion.

Emoov’s crowdfunding success is a great example of how Crowdcube helps growth companies find capital to take advantage of market opportunities and build their brand while allowing investors who believe in the company to take part in that growth by investing as little as £10.

Luke Lang

Co-founder, Crowdcube

This is exactly why Crowdcube needs to lose its FCA licence. The evidence is there for the FCA, who do not need to go anywhere where man has not been before - they just need to wake up. 

Beam me up Scotty. 

EEEEEEEEEMove get weird on Crowdcube.

Emoov recently amalgamated with two other loss making online estate agents, then they came back to Crowdcube and raised over £1m. The valuation during the raise was £102m. Now they have sent out an email revisiting this valuation and telling SHs the valuation is to be £51m - adding that this is good for them as they can have twice the number of shares. 

Hmmm. What is 2% of 0? The same I think as 4% of 0. 

In 2015, when Emoov raised £2.6m on Crowdcube, they were valued (by Emoov) at around £22m. So even £51m, albeit a paper value, is double this.

We wrote about their last raise here 

We wonder if the management have been told by institutions that £102m is way too rich for the IPO they say will happen in March2019 - even though Emoov themselves predict this will be a £130m. Halving your valuation after you have raised £1m  - however you did it - is crass. It suggests the management havent a clue.

If anyone had any doubt about the ridiculous valuations that Crowdcube allow/encourage, then this has to put it to bed. Crowdcube investors accepted £102m and are now, just weeks later, being told it's £51m. You couldnt make this up. 

Our take on the new Emoov and its predicted £130m IPO in 7 months time.

The new Crowdcube Emoov campaign has topped its £1m target on day one. £500k of that was from one source. The valuation puts this newco, made up of 3 oldcos, at £104m. 

Wow! and I thought the World Cup was unpredictable. 

The hope seems to be that a £9m spent on advertising will rocket turnover in the next 12 months (for FY19) by 550%. Hmmm. Will it really be that immediate? Turnover has been stagnant recently - hence the merger? Even Purple Bricks, who spent £10m on advertsing in 2017, only saw UK growth at around £150% and that was from a more advanced starting point. 

The IPO is, according to the company, expected to value the company at around £130m and then they hope that the post float euphoria will lift this value by another 300%, as it did with Purple Bricks.

Purple Bricks spent ~£10m on advertising last year and £8m the year before. Can Emoov match that year on year? The winner will be the player with the largest market share and Emoov have it all to do. Purple Bricks have already crossed half of the Rubicon and are producing operating profits. Emoov and its two siblings were all loss making before the merger and two of them had negative balance sheets. PB raised £50m in the City post IPO in 2017. 

If on line estate agents are the future, another whole topic of open debate,  then PB have a considerable first mover advantage.

You will have to excuse me for being a tad reluctant to believe much of this will happen as they plan. I do hate to ruin a party but these numbers, going on the past experience of the 3 companies that have amalgamated to create this newco, seem very generous. The main thrust of the pitch seems to be we can do what PB did or better. Well there is little evidence to back this up and Emoov are starting from 30 yards behind the line. 

On Crowdcube's forum, we are told there is a very telling Q&A. The Q is, how have things gone so far for FY2019. The response skirts around the issue with lots of jargon and paff but does not attempt to answer it. Game Set and Match for me.

There is also the vexed question of EIS. If new SHs buy into this round and the company's planned IPO takes place Q1 2019, these new EIS reliefs will only be valid if the shares are held for 3 years from purchase. Nowhere in the pitch is this explained. In fact in a direct Q on the issue, Emoov prefer to indicate some tax loophole that they think gets around this. It is very simple - 3 years from purchase. HMRC do not consider an IPO an exit. So if the IPO happens and the shares then flop a year later, SHs will have to decide if loss of EIS is better than the holding a falling stock. To retain the relief they are locked in for 36 months. That's not quite the picture being painted on Crowdcube.

Maybe that is misleading - probably not though! It would certainly worry me that the CEO of Emoov doesnt know the EIS regulations. 

Of course the Q1 2019 IPO is perfectly timed to coincide with the crash of all crashes; that is Brexit DDay. Maybe that was the plan?

Strawberry anyone?

Will Emoov's amalgamation solve anything?

We'd say the merger of Emoov, Tepilo and Urban is a positive move. But as the Irishman said when asked the way,  where are you coming from?

All three of these online estate agents have one thing in common, they burn large amounts of capital to make increasing losses.

The last year of filed accounts shows an accumulated loss of around £8m. So maybe there will be economies of scale with one administration cost instead of three? Will this scaling up of the brand (whatever the new one is) have an impact on the Purple Bricks market leadership? Probably not. 

Amusingly, according to the ex Dragon James Caan, who is a major backer of Emoov, this was not a merger. His story is that it was a takeover by Emoov of the other two. If this is true and no one but Caan is claiming it is, then that could be good news for 765 investors who put £2.62m into the company via Crowdcube in 2015.

The 2015 Crowdcube pitch had the usual grotesquely inflated projections and showed the company making losses for YE April 2017 of ~£1.6m, when in fact the loss was £3.1m. But who cares, eh? According to Crowdcube the event was a merger.

Now the 765 have a smaller share in larger pie. Lets hope that it doesnt fall to bits when its cooked.