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Friday 18 October 2019

Monzo shareholders face shake-up to investor terms

Investors in the challenger bank are to vote on proposed changes to their terms.

Shareholders are to vote on proposed changes to the terms of their holdings in Monzo (Monzo/PA)
Shareholders are to vote on proposed changes to the terms of their holdings in Monzo (Monzo/PA)

By Alys Key, Press Association City Reporter

Monzo has been drawn into fresh controversy over its crowdfunding model, with shareholders in the challenger bank facing an overhaul to the terms of their investment.

The changes, put forward by equity fundraising site Crowdcube, are subject to an online poll sent out this week which gives shareholders one month to respond.

Under the new terms, Crowdcube would be able to charge investors fees for handling transactions and sell their shares without prior consultation.

Monzo shares are held in trust by a Crowdcube nominee company on behalf of investors who participated in its three crowdfunding rounds.

The vote is only for shareholders from the first and second round, as investors in the most recent round – which raised over £20 million – are already signed up to the new terms.

We have been working closely with Monzo to give all investors equal nominee terms, should they collectively want it. Luke Lang

Crowdcube proposes to add a new clause stating that it may charge investors a fee for the provision of its services “from time to time”.

Posting publicly on the online Monzo forum, a spokesman for Crowdcube said this would not be applicable in “normal circumstances” but could be used in special situations.

“This means that in exceptional circumstances we could deduct money from proceeds we receive to distribute to shareholders, for example, charging an international transaction fee in the event of an exit for an international investor.”

It could mean Crowdcube would take a cut of shareholder returns in exchange for handling the transfer of shares in the event that the company is sold or goes public.

Monzo has been mooted as a candidate for stock market flotation after it became a tech “unicorn” with a valuation of 1 billion US dollars (£770 million) last year. It has also been touted as an acquisition target for big banks.

Investors have expressed concern that the new terms mean they may not be consulted about the sale of their shares in the event of such an exit.

Crowdcube’s representative said on the forum: “If there is a potential sale of the whole company, or there is an opportunity for investors to sell some of their shares, we will always seek to ask Monzo investors to vote on the matter.

“If there is a sale that is clearly in the best interests of shareholders, and which depended on a very quick execution, then we would not want to prevent that transaction from happening, or for Monzo investors to miss out on the opportunity.”

The right of existing shareholders to buy new shares before an offer is opened more widely could also be affected under the new terms.

The proposal would give Crowdcube the ability to waive pre-emption rights if it is deemed to be “in the best interests of investors as a whole”.

Luke Lang, co-founder of Crowdcube, said: “Investors from Monzo’s first two crowdfunding campaigns have the opportunity to vote on proposed changes to the nominee terms which would make them consistent with investors from the December campaign.

“We have been working closely with Monzo to give all investors equal nominee terms, should they collectively want it, following updates to Crowdcube’s terms made in between their last two campaigns.”

The poll relating to the decision is open for responses until March 18.

It is not the first time Monzo’s crowdfunding has been the subject of controversy. In November it emerged that the bank was allowing customers to go up to £1,000 into their overdraft in order to participate in the latest fundraising.

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