Monzo and Crowdcube try to change investors rights. Are they being totally open about the consequences?

 In a request we have seen from Crowdcube, concerning Crowdcube's Monzo Nominee SHs, investors are being asked to agree to a series of fundamental changes to the their original shareholder terms. These changes, it is declared, are in the best interests of SHs.

We dont wish to go into what is a private matter between SHs and Crowdcube/Monzo on here but if this clause or something pertaining to it, was to be found, for example, in the new terms, would it worry you? The nominee would in this case be Crowdcube - if this was in fact a real clause from the changes - 

Save in respect of the Nominee’s fraud, negligence or default, the Nominee shall have no liability whatsoever to the Investor and may use any assets it holds on trust to cover any loss, liability, damages, costs and expenses incurred or suffered by the Nominee in the due performance of its rights and obligations under this Declaration of Trust.

The Monzo forum for these things is buzzing with investors asking what these changes mean, many of them declaring that they don't have time to read through them or indeed if they have, that they simply don't understand them. Apparently Monzo did not see fit to include an email of their own. You can see the forum here. 

It looks to us as if Crowdcube have handled this very poorly.  And as if by magic, CC have now posted a long explanation (their idea of one) which includes this - 

Can Crowdcube use the value of our shares held in their trust to cover any losses they might incur for fraud, negligence or breach of the terms?
This term has not changed and was included in the existing Declaration of Trust.

Do Investors ever read the DofT? 'Any losses'  - so for example if they lost a case against them from SHs in Emoov or Sugru? This strikes me as crazy. Plus there is the new issue of CC being able to slap expenses on without aksing - even though they say they wont. If they wont why do they need the permission? Is there a lawyer in the house? 

Are Monzo guilty, as charged, of promoting their overdrafts to buy shares in their new £20m equity round?

This is one of those instances where different people see different things in the same statement.

In this case we think the Times have got it wrong. Which is rare.

https://www.thetimes.co.uk/article/monzo-lends-customers-money-to-buy-its-shares-375nmdc6r 

Monzo state in the prospectus for raising £20m, that customers need to have enough money in their accounts to purchase shares. This 'enough' can include their OD if they have one, it goes on to say. Of course we all know that these shares in Monzo are illiquid for now and may always illiquid.

What is does not say is that Monzo recommend or even suggest that customers use their Monzo OD to purchase shares in Monzo. That much is very clear. At this stage of the process only Monzo customers can purchase these shares - it has not been opened up to the public yet. This is all part of the requirement for Monzo to offer existing SHs first bite. And Monzo state that customers must use their Monzo accounts to buy these shares - a solid way of increasing usage. It seems this may all have been misread.

This wording doesn't reflect well on Monzo but the article doesn't reflect well on The Times. Monzo could have been more careful to separate the sentence about buying shares and the one about the OD.
If the prospectus was promoting an offer of a Monzo overdraft to buy illiquid shares in Monzo, then the Times piece would be legitimate. But Im really struggling to make that case by reading what Monzo have actually written. 

What would have made and might well make a better article is to ask just how Monzo go about judging if applicants should be given a £1000 OD. We are told that it's really pretty easy to get one and that the 'checking' is largely self assessment. Now that is something to worry about.

Monzo to raise £4.5m without the Crowd

As if to emphasise the story below, we have been contacted by a Crowdcube shareholder in Monzo (previously Mondo), the challenger bank that raised £1m on Crowdcube recently.

The Board at Monzo have issued shareholders with some news - which if you read our last blog is at least a good start. However the news is not all good.

In the Crowdcube pitch Monzo talked about the need to raise further funding, approximately £15m. The Crowd would be involved. The Board have now decided that they will raise a separate £4.5m now via VCs. No Crowd.

When we asked this shareholder if he thought this was in the interests of all those who backed Monzo via Crowdcube, he said -

Personally I don't think it's ideal - they should've given the crowd an opportunity to, given they point out they "couldn't have built Monzo" without the Crowd's help - and the Crowd even helped pick a new name for the bank. I'm sure the appetite is there.

What this now does is dilute the crowd's holding which may well have an effect when Monzo come back for another £15m next year, We will have to wait and see. As someone once said, shitting on your own doorstep is never a good idea.