More than 15,000 private investors have sunk fresh capital into the lossmaking wealth management company Moneybox, making it one of the most popular crowdfundings in Europe ever.
Only the digital bank Monzo, which secured investment from 36,000 crowdfunders in 2018, and a previous capital raising by Moneybox, when more than 16,000 people invested, have been more popular, according to the Crowdcube platform, which organised the capital raise.
By the offer close at 9am today 15,348 investors had taken the plunge, buying £6.26 million of new shares, or an average of £407 each. One investor put in £70,000, according to Crowdcube.
The capital-raising was based on a pre-funding valuation of Moneybox of £298 million so the new money takes its notional value past the £300 million mark, almost double the level of two years ago, when a previous share issue valued it at £154 million.
Moneybox is one of a number of upstart wealth management companies trying to woo younger customers and take market share from the traditional industry. Its smartphone-based offering of convenient, low-cost savings and investment products has won it 850,000 clients with £3 billion of assets.
Crowdcube is one of the big two UK crowdfunding platforms, which enable retail investors to back start-up and early-stage ventures. Crowdfunding has helped to raise capital for high-risk ventures but very few of the projects have yet to crystallise profits for investors.
Ben Stanway, co-founder of Moneybox, said the money raised had beaten the company’s internal target of £5 million. He said: “A lot of people who invested in the last round [in 2020] have invested again in this round, which is encouraging.” Many are thought to be Moneybox customers.
Last year the company appointed Laurel Powers-Freeling, the former boss Marks & Spencer Financial Services, as its chairwoman. The move was seen as a possible preparation for a fresh capital-raising and an eventual flotation.
In the first few months of this year, Moneybox raised £35 million from institutional investors in a Series D fundraising. Its biggest investors include Fidelity International and the tech investment house Polar Capital.
Although the retail offer was pitched as enabling the public to invest “alongside the top venture capitalists” and buy shares “at the same price as our institutional investors”, that claim has raised eyebrows with some outside experts.
Institutional investors did pay the same price per share, but bought a different category called preferred shares, which give them significantly better terms than small investors in the event of the company having to be liquidated or its value falling by three quarters. In that event institutional investors would get first call on the assets and retail investors would get nothing.
The information about retail investors buying in at the “same price” as institutions was worded in a colourful headline in an attractive presentation on the Crowdcube website, but the detail that they were in fact buying a different, inferior class of share was given only in a separate document.
Stanway said that the perk for institutional investors, known as “downside liquidity preference”, was very commonly used in venture capital fundraisings and the chance of Moneybox’s valuation falling below the trigger point of £86.4 million was “a very low probability event.”
One independent financial adviser, Justin Modray, of Candid Financial Advice, said: “Joe Public seldom enjoys the same privilege as large institutional investors and I fear that may be the case here, as the ordinary shares they’ll receive could end up being a poor relation to the preference shares enjoyed by the big boys and girls.”
A Moneybox spokeswoman said: “We believe the way we’ve communicated it is true and accurate.”
Moneybox has ambitious plans to grow, forecasting in its investor presentation that it hoped to grow to 4.1 million customers and £58 billion of assets under administration by 2030. Under its own predictions it expects to make three more years of losses totalling £30.8 million before moving into ebitda profit of £3.7 million in 2025. On its present post-crowdfunding valuation of £304 million its shares are therefore priced at about 82 times forecast 2024 profits.
The buy case is that Moneybox has been growing very fast, is liked by its customers, is an industry leader in Lifetime Isas and will generate much bigger revenues as its customers (average age 32) mature into much bigger savers and investors. It could also be bought by an establishment firm wanting an instant springboard into millennial customers and good digital technology.
The avoid case is that much of the ambition is already fully priced into the shares, competition in wealth management is intensifying and the extraordinary surge in interest in retail investment of the lockdown era is now dissipating. Investors are also cooling on lossmaking growth stocks as the interest rate cycle turns.
Investors now have a seven-day “cooling-off period” during which they can change their minds.
Stanway, who with colleagues now owns a “mid- to high-20s percentage stake” in the business, told The Times that he was considering adding crypto to the investment choices for customers.
