Tuesday, 21 February 2017

Crowdcube's UP Investments manages a sale.

UP Investments raised money on Crowdcube in 2014. Now the company is being sold.

But read on, as it's not really. 

Since 2014 the company has made cumulative losses of £734k against projected losses of £361k. So pretty standard for a Crowdcube company.

What is odd about this one is the line up of their management team. 

A quick glance at their website shows a large team - 20 of them.

A quick check on their CH page shows all but three of the company directors have resigned. And note they resigned well before the company was sold.

The company's General Counsel and Compliance Director states that ''This business has downscaled and has been engaged in finding a strategic partner due to funding constraints''  on his Linkedin page. Thats ok and must be true given that this guy is a lawyer. Incidentally he resigned as a director in June 2016.

Jim Milby who is listed on the company's website as the Chairman makes no mention of UP in his Linkedin page.

The Finance Director resigned in May 2016.

Several Directors talk about the sale including the founder. Like it was a success.

The company somehow managed to be included in a list of the World's Top 25 Fintech companies published in the Sunday Times. Crowdcube were not on the list. In fact not one of the UK's equity Crowdfunding sites made the list. How UP got on to it is anyone's guess. 

We asked the company for a comment. They responded that the company had been or was in the process of being sold for an undisclosed amount with the agreement of the shareholders. Only one of the stated management team is actually working for the company. The company runs a FCA regulated platform.

So this has to go down as a Crowdcube success - doesnt it?

Addendum

Below is the full text of the email from UP to shareholders last October. As you can see claims made by most of the company's directors (on their Linkedin pages) that the company was sold is a a trumpism. Watching the salesmens' (UP directors) videos it is now clear that this company was far from a good bet. A couple of points to note -

1. Their advice on claiming negligible value is contrary to HMRC EIS rules and HMRC have refused applications. Useful advice from a FCA licensed platform!!

2. There was no agreement from shareholders as the CEO James has claimed to us - that is a Kellyannism.

3. White Label Crowdfunding Ltd is a hollow company with very little capital as we write. What they do have is a close relationship with Rebuilding Society, which, not surprisingly, is a main contributor to the investment opportunities listed on the failed UP platform. Ignoring the poor grade of investments they offer, we hardly think that this will pass FCA approval; if they are awake. By way of an example, the CEO of White Label is also the CEO and founder of Rebuilding and on his Linkedin page, White Label give Rebuilding as their main client. Some achievement that!

 Crowdcube DD as usual nowhere to be seen...............

Dear Shareholder

As per my recent email, the Board has concluded that there is no prospect of UP Investments Holdings (UK) Limited (“UIH”) raising further funding to put our platform onto a commercial footing.

The Board has thus reached an agreement for the sale of UP Investments Holdings (UK) Limited (“UIH”) to White Label Crowdfunding Limited (“WLCF”).

The Board recommends the sale of UIH to WCLF

The Board has performed an exhaustive search for potential buyers over the past six months, and is confident that the offer from WLCF represents the best available value for shareholders. The owners of WLCF have impressed the Board with their development plans for the Platform.

The Board has agreed that to put UIH on a commercial footing requires further development work. This work will need substantial further funding, and WCLF have a better chance of  raising the capital needed to achieve this.

Both parties have agreed to structure the Deal as a simple Share-for-share exchange, with each of you receiving 17 WLCF Shares for every 30 newly consolidated UIH Shares that you hold.

The sole asset of UIH is its investment in UP Investments Limited (“UIL”), and UIL has made significant trading losses in the two accounting periods that ended on 31/05/2016.

Enterprise Investment Scheme (“EIS”) shareholder considerations

The Board’s financial advisors believe that UIH shares do not currently have any financial value, and the Board urges you to seek to file Negligible Value Claims on your shares as soon as possible. Filing a Negligible Value Claim will allow you to make Share Loss Relief Claims against your total income of the current and prior tax years.

For those of you who are waiting for your EIS claim forms, please note that our accountants have submitted the EIS1 form to HMRC. Therefore you should expect to receive your EIS3 claim forms shortly.

Any Income Tax Relief you have claimed to date under the provisions of either the EIS or the SEIS Scheme will not be reclaimed, but instead, will be deducted from the initial cost of the shares when calculating the Share Loss Relief.

The Board hopes that the WLCF shares that you receive in exchange for your UIH shares will appreciate in value once the Platform begins full commercial operation.

Please bear in mind that any gains you realise on the WLCF Shares in the future will be subject to standard Capital Gains Tax.

Shareholders are advised to take professional advice on all the above tax matters and the Agreement itself before taking the steps set out below.

WCLF's vision for UIH

Attached to this email is an overview, written by the prospective buyers, of their vision for UIH. Please have a look at this before the formal offer is made later this week.

The next steps in the process

In the coming days, the prospective buyer will be emailing you with the following the documents via an online signing service. As of tomorrow, the directors - including myself - will sign the agreement in advance of other shareholders.

A copy of the Share Sale Agreement
A share indemnity letter
A stock transfer form with your details

When you receive these documents, please give them your consideration  before making a decision to sign. Your signature will state to the buyer that you are willing to accept the terms of the Deal.

A final thank you from myself

The last twelve months have been difficult at times. They have taught me that a new injection of funding and enthusiasm is needed in order to realise my vision for UP.

The people behind WLCF share both my vision and my approach, so I am pleased to recommend this deal.

I have agreed to stay on with the company as a non-executive director. I will look to help smooth the transition and assist the new owners with progressing their plans to reimagine and restore UP.


Yours sincerely,
James 











3 comments:

  1. I think this is a repeat of your post from 20th October. I invested in UP because I liked the idea of the secondary market they planned to build. Sadly they never got round to it. Interestingly, I claimed for Negligible Value on their advice, but this was rejected by HMRC because of the share swap with the buyer. Fingers crossed the new company does OK, but it's not a loss I can't afford, especially with EIS and any eventual loss relief. Will be interesting to see if/when CC come up with their secondary market.

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  2. Yes that's right. I have just reread the email that UP sent to shareholders and have added a view above. It just makes the founders look even more dubious than they were before in claiming that the business had been 'sold'. It was given away. They couldnt even get their EIS advice right - what a bunch!

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  3. Interestingly I spoke to the CoSec, and he said that he had put the shares into a Negligible Value state, so the claim should not have been rejected. Ultimately I don't think it makes a huge amount of difference - it's just whether you get loss relief now or in the future. If now, and then the newco has a good exit, then presumably it would be deducted at that point?

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