Trap Oil Group down 28%

Miranda Wadham
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Trap Oil Group down 28%
Trap Oil Group was down 28% today after operations were concluded on the Niobe exploration prospect. The exploration drilled to the target depth and fulfilled its license obligation, but no significant hydrocarbons were found. The well is to be plugged and abandoned. Trap Oil Group stocks have plummeted over the last 12 months and hit a year low in May. Their current share price is 0.43p a share, down from 0.62 at close yesterday.

Daniel Stewart Securities PLC Subscription to raise £1.2million

UK Investor Magazine
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Daniel Stewart Securities PLC Subscription to raise £1.2million
Daniel Stewart Securities PLC was up 42.17% this morning after announcing that it raised £1.2m through a cash subscription. The investment bank’s subscription, conditional on Admission, is for 35,820,889 ordinary shares at a price of 3.35p per ordinary share of 0.25p each. There was sufficient demand to increase the offering from the £1m that was originally announced. Following this, the company’s issued share capital will comprise 932,272,580 ordinary shares.

Should you invest in mini bonds?

Miranda Wadham
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Should you invest in mini bonds?
Many crowdfunding platforms have begun to offer mini bonds, an alternative way for businesses to secure debt-based finance. Whilst they advertise an attractive interest rate, there are many aspects that make them different to traditional bonds and therefore, ultimately, a riskier choice for investors. This new craze in alternative finance had spawned many success stories – River Cottage, Hugh Fearnley-Whittingstall’s cookery business, drummed up £1m in just 36 hours. Investment in mini-bonds is a tempting prospect – they promise a good return, the opportunity to get the money back on a set date and a few extra incentives (free burritos anyone? That’s what people putting money into a bond by Chilango, the London-based Mexican food chain, received.) So what are the pros? Firstly, the yield is much higher than anything offered by banks, or traditional corporate bonds. Most mini-bonds offer around a 7%-8% interest rate, either in cash or rewards. Like Chilango, Hotel Chocolat followed the rewards method and paid their investors a 7.33% annual return in chocolate – little incentives like these make putting money into mini-bonds a fun, niche way of diversifying your portfolio. From the business’ point of view, offering non-monetary rewards such as these create a strong bond with the customer and hopefully build up a good client base which will be beneficial for business. Another advantage that they have on corporate bonds is value for money. With corporate, the money is accessed through a fund run by a manager, who invests the money into different companies. Though this spreads the risk considerably more than a mini-bond, investors will have to pay fees to the manager that will detract from the return on the bond; with mini-bonds, the money goes direct to the company and cuts out the fund manager aspect, making it a cheaper option. So far, so good. Or is it? “These bonds often look secure, but they are actually higher-risk alternatives.” James Tomlins, manager of M&G’s Global High Yield Bond fund and European High Yield Bond fund warns. Mini-bonds constitute a far higher risk than traditional bonds. They are often compared to retail bonds, which were launched on the LSE in 2010; however, unlike these, mini bonds are not traded and there is no secondary market for them. Because of this, investors have no choice but to wait for the bond to mature before getting their capital back, which is usually around 5 years. Similarly, they are not subject to the same scrutiny and analysis as retail bonds, which are examined by legal and financial experts before becoming available. Mini bonds also have a greater chance of default than other bonds; government bonds imparticular are far more secure. In early 2015 the first mini bond defaulted; bonds issued by Secured Energy Bonds stopped paying interest, eaving investors out of pocket. Furthermore, unlike most bonds, mini bonds can’t be held in an ISA; although they can be held in a SIPP. Essentially, mini bonds constitute pretty unchartered territory. Tomlins continues: “A lot of practices in this market fall far short of what we would expect from the institutional bond market. The level of disclosure you get is pretty limited. You can have a prospectus that is four or five pages long and very shiny, but pretty minimal in terms of financial information.” Mini bonds can be an excellent choice; as long as you’re savvy about it. Putting all your capital into one investment is never a good idea, but diversify your portfolio with one or two mini bonds and you could find yourself could reaping good rewards.

Debt. Friend, Foe or Frenemy?

UK Investor Magazine
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Debt. Friend, Foe or Frenemy?

Debt. The very word is enough to send the sun scurrying behind the clouds and shivers running up and down your spine.

And yet, the overwhelming majority of UK adults, businesses, and indeed many of the world’s governments, depend on debt to operate.

For example, as a nation, by the end of February 2015, adults in the UK owed a staggering £1.471 trillion to creditors. Our mortgages and credit cards alone have created an average household debt of over £55,000 meaning many of us owe more than we earn in a year.

Businesses and Government are in on it too. The UK Government borrowed over £2500 per second in February 2015. Whilst businesses routinely fund growth and ease cash flow by taking on debt in the form of bank loans, overdrafts, lease/hire purchases or bonds. *

We’re all at it, using debt every day to make things better and easier. All of which makes debt a confusing thing.

It is our foe because as we all know it costs more to borrow than the amount borrowed in the first place. And without careful planning and management, debt can easily run away from us with potentially catastrophic results.

Yet, it is also our friend, enabling us to do things we might otherwise not be able to do. Things that benefit us in other ways, like holidays to de-stress, a start-up loan to get a business off the ground, or a cash injection to keep the NHS working.

And, there is another way in which debt can be our friend. When we, as consumers become the lenders rather than the borrowers. By lending to businesses we make the interest, rather than having to pay it.

Making Money Out of Debt
The world of business lending has, until now, been owned by the City. With its jargon and complex dealing markets, it’s a world few of us can hope to penetrate. Made up of niche specialisms with incredibly sophisticated and nuanced practices, even those who work in the money markets rarely claim to understand it in its entirety.

However the advent of crowdfunding and peer-to-business (P2B) lending is opening up this world. So if you’re interested in trying it out to see if you can make your money work for you, here are some basic things to consider first:

1. What is your risk tolerance?
Almost all investments carry risks. As a general rule of thumb the higher the expected returns, the greater the risks. And you need to understand what level of risk you are able to afford. Think about the financial impact of losing all of the money you lend to business(es) and decide if you can afford this.

This amount will be your risk tolerance, and you should not lend any more than this at any one time.

2. Protection not prevention.
Investment products, including lending money to businesses, are all designed in different ways and this is called its structure. Structure is extremely important, it is this that determines what protection your money has. No investment is devoid of risk, so protection is about limiting the possibilities and impact when things go wrong, not eliminating them.

Protection comes in various forms. Such as having the ability to sell part or all of your investment/loan to a third party and thus exiting the investment early if needed (although of course you also cease to benefit from the returns if you no longer hold the investment). Or your investment might be secured against assets that can be sold to raise cash in the event of the business defaulting. This is great, but you also need to know where you would be in the queue of creditors to understand the likelihood of recouping your money in these circumstances.

Look for investment products that are structured in ways that help protect your money.

3. What will your money be used for?
As with our personal finance, how we spend any money we borrow can determine our ability to pay it back. If we use it sensibly, it can add value for us but used badly we may have difficulties in repaying it. Think about it this way, if you borrow money to go on holiday, you know you’ll need to do something else to earn the money to repay the loan. If you borrow money to start a business venture, you hope the business venture itself will not only earn the money to repay the loan but will also create extra profit for you.

To be sure that the business you are lending money to is more likely to be able to pay you back, plus interest, find out how the money you are lending will be spent. And throughout the period of the loan, make sure you have access to the up-to-date information you need to see this is happening.

4. Are there any other restrictions that might help protect your money?

A lender can insist how a borrower spends the loaned money. For example, if you get a mortgage you have to use it to buy a property. If you get a car loan you have to show you have spent the money on buying a car and not just blown it on a holiday to the Caribbean!

These are called restrictions and you can also look for these when finding a loan product enabling you to lend money to a business.

5. Have you looked at the tax implications or charges?
Headline interest rates can be very attractive, but also misleading if you then find you have to pay tax and investment fees. Before deciding to invest calculate the amount of money you will actually make by deducting any costs from the amount you should be repaid in interest.

And of course, your returns will be better if the investments can be held tax-efficiently, now or in the future, in the form of ISAs or SIPPs.

6. Lastly, but perhaps most importantly – who are you lending to?
Debt is essentially an IOU, and the quality depends heavily on the company and the people borrowing the money.

In the City where banks and institutions lend money all the time, experts assess a business based on its financial health – a bit like a high street bank does when we apply for a mortgage or a credit card. They’re looking for a good balance sheet (essentially a snapshot of the company’s assets minus their liablities). Also they look at cash flow. A good business with strong management of its finances will ensure it always has enough money in its accounts to pay its bills. Before investing in a business you need to look for evidence suggesting it is financially healthy and competent.

And it is also about people. Who’s in charge of the business? What is their personal track record, their history and experience? Can you see evidence suggesting the management team will be able to handle and use the money you’re lending them wisely? You wouldn’t lend money to a friend you consider to be irresponsible and expect to be repaid. So don’t lend money to businesses unless they can prove they are responsible.

For more information on P2B lending as a form of investment check out the FCA website and their guide to crowdfunding here.

* data in this article has been taken from the Money Charity annual debt survey April 2015.

https://www.crowdstacker.com/knowledge/debt-friend-foe-or-frenemy

 

 

 

May 2015

Gold drops beneath $1200

UK Investor Magazine
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Gold drops beneath $1200
Gold has continued its decline beneath $1200 as Greece optimism saps demand for safe haven assets. Since hitting 2015 highs in January, the yellow metal has struggled to keep its head above the $1200 level. A combination of a strong dollar, improving economic conditions and a reduction in geopolitical risks has improved investor sentiment, and lessened their need to hold gold. The Chinese stock market rally has also dampened gold investment demand as investors sell existing assets to jump into the stock market bonanza. China accounted for roughly 32% of global demand in the first quarter of 2015. “Gold has absorbed a lot of ‘bad’ news recently and we wonder just how much lower the market is likely to go. Physical EM (emerging market demand) still appears sluggish. This opens the way for lower prices but we think declines may be modest” Said James Steel of HSBC in a research note. The prospect of a US rate hike is likely to cause further downside in gold. In the run up to the first hike, the dollar is likely to strengthen and gold, being dominated in dollars, is likely to suffer. Although most factors are pointing to a falling gold price, India may step in to take up any slack left by China. India is responsible for around 25% of global and demand and the government has just loosened restrictions on imports. Some hope the increased demand for gold in India will be sufficient to lift gold prices but demand has so far been somewhat lacklustre.

Crowdstacker survey finds investors think with their hearts, not heads

Miranda Wadham
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Crowdstacker survey finds investors think with their hearts, not heads
When thinking about investing in a company, there are certain factors that should be taken into consideration. Clearly, the company’s past performance is a good place to start. Read over three years worth of financial reports, cash flow and profit projections and net worth of the company. Secondly, it is necessary to ensure the management of the company you are considering has enough expertise. What are the team behind it like? Look for a strong knowledge of the industry, as well as covering the marketing side. The idea may be fantastic, but if no one knows about it because it isn’t marketed correctly, it won’t be a good investment. Market analysis is also important – make sure there is a gap in the market for the business you are considering investing in. Start-up companies with too many competitors are no go. Finally, and most importantly: don’t invest what you are not prepared to lose. With only 10% of new businesses surviving their first year, the risk is real and needs to be considered fully. Whilst this last one may seem obvious, research by crowdfunding platform Crowdstacker suggests that people are actually more likely to think with their hearts than their heads when considering investments. 53% of people surveyed valued the idea of supporting local businesses and a good rate of return, over the chances of losing money. Nationally, it appears Scots are the safest investors; 34% prioritised risk over rate of return. Overall, less than a third of people take into account how the likelihood of losing all their money. “The clearest message from our research is that people too often invest with their hearts, not their heads,’ explains Karteek Patel, CEO of Crowdstacker. “Investors should be asking themselves two questions before they invest. Firstly who am I giving my money to and can I see evidence that they are likely to use it responsibly? Secondly, what protections are in place to help me recover my money should the worst happen. “If there is a satisfactory response to these questions, only then should you move on to consider the rate of return, or whether the investment supports your personal beliefs. “Obviously an investment is about making your money work harder and getting a good rate of return, but for the majority of investors and savers out there, most of whom can ill afford to lose out, the priority should be how their money will be protected. Only one in five of the people we interviewed ranked security as their number one consideration.” Karteek continues. Crowdstacker are an online crowdfunding platform that specialise in established businesses with a strong trading record. The industry’s consumer protection and financial regulatory body, the Financial Conduct Authority, have confirmed that they are one of the first peer-to-peer lending platforms to be directly approved by them. Karteek explains: “The FCA approval process is heavily focused on what platforms like ours do to protect investors, and as the industry develops further this will undoubtedly be at the heart of how successful crowdfunding platforms operate.”

Merger deal boosts UK supermarket shares

Miranda Wadham
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Merger deal boosts UK supermarket shares
Shares in UK supermarkets Sainsbury’s and Morrisons were both up after news of merger between Dutch-based Ahold and Belgian Delhaize. In the deal announced today, Ahold will hold a 61% stake in the merged entity headed by Ahold Chief Executive Dick Boer. The merged company will have 54.1 billion euros in sales, more than 6,500 stores worldwide and complementary operations in the United States and Benelux, making it the biggest supermarket merger in a decade. Ahold, known in Europe as owning the Albert Heijn chain of supermarkets in the Netherlands, is also operator of Stop&Shop and Giant stores in the United States, while Delhaize owns the Food Lion and Hannaford chains. After news of this deal, Sainsbury’s shares were up 2.4%, and Morrisons up 2.1% Sainsbury’s shares were also boosted by Societe Generale raising its rating on the stock to “buy” from “hold”.

UK government cuts stake in Lloyds Bank

Miranda Wadham
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UK government cuts stake in Lloyds Bank
Britain has cut its share in Lloyds banking group to below 17 percent, it was revealed in a stock market disclosure this morning. The taxpayer’s stake has now fallen by 1 percent to 16.87 percent, making the total sum recovered by the taxpayer in this move £11.5bn. Lloyds was rescued at a cost of £20.5bn to taxpayers during the 2007-9 financial crisis. A Lloyds spokesman said in a statement: “Today’s announcement shows the further progress made in returning Lloyds Banking Group to full private ownership and enabling the taxpayer to get their money back.” “This reflects the hard work undertaken over the last four years to transform the group into a simple, low-risk and customer-focused bank that is committed to helping Britain prosper.”  

Starbucks puts £19m into Global Farmer Fund

Miranda Wadham
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Starbucks puts £19m into Global Farmer Fund
Starbucks has allocated another £19m to its Global Farmer Fund, an enterprise offering loans to farmers to help them prepare for extreme weather and bad harvests. The Global Farmer Fund is one of the company’s ethical sourcing initiatives that help ensure the sustainability of the specialty coffee industry. This investment is an addition to the initial £12.5m channelled into the project in 2008. Starbucks has always been committed to fair trade; in 2015 99% of its coffee was ethically sourced. “This new investment demonstrates how we remain steadfast in our support of farmers around the world,” said Craig Russell, executive vice president of global coffee for Starbucks.

Crystal Maze hits crowdfunding target in 8 days

Miranda Wadham
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Crystal Maze hits crowdfunding target in 8 days
After widespread media excitement, The Crystal Maze reached its crowdfunding target yesterday, just one week after the campaign went live. The interactive experience is based on the popular 90’s TV gameshow, The Crystal Maze, where players had to complete four different zones to reach the maze at the end. The project’s crowdfunding target was £500,000, raised on Indiegogo. People pledged amounts between £5 and £10,000 – pledging the highest amount gave you the opportunity to hire out the crystal maze for a day once it is up and running. Founder Tom Lionetti-Maguire said “The Crystal Maze was always about the contestants. By bringing it to Indiegogo, we put its future squarely in your hands.” Not only have they successfully raised the funds to build the project through the rewards-based crowdfunding model, they have also created an effective marketing strategy; by offering Early Bird Entry in return for a £30 pledge, the founders have ensured that they have already sold out the first few sessions. If they enjoy the experience, their word of mouth could be their best – and cheapest – form of advertising. The Crystal Maze is still open for funding on Indiegogo.com.
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