Crowdfunding investors who put money into the budgeting app Money Dashboard have ended up losing a large chunk of their investment, This is Money can reveal.
Money Dashboard dubs itself a ‘personal financial assistant’. It allows customers to connect all online current accounts, savings accounts credit cards in one place transactions are automatically grouped categorised into various tags, using Open Banking.
It launched its first crowdfunding campaign on Crowdcube in 2017, raising £1.25million. Two years later it smashed its £1.5million target, raising £3.7million at a valuation of £21million.
Money Dashboard raised money via crowdfunding platform Crowdcube but now investors have lost out on a large chunk of their investment
It went back to the crowd in March 2021, raising £929,460 as part of the Future Fund’s convertible loan note scheme.
But last week, Iain Niblock, who took over as chief executive in March 2021, told investors the company had been sold to an unnamed buyer on 28 February for £8million.
It is understood to be the first time the company had communicated with its own crowdfunding investors about the sale.
In an email he wrote: ‘I appreciate that the outcome is disappointing for shareholders, the lack of updates has caused frustration, so please let me explain.
‘The Money Dashboard business has not developed as expected over the past two years.
‘Although there has been considerable technological development, the growth in revenue has been disappointing. That growth has not been enough to support the associated costs of running the business…
‘In short, Money Dashboard failed to reach the scale necessary to support the costs of the business.
In September Money Dashboard published its Q3 report in which it said it was ‘operating in a highly attractive space with a large number of established products now utilising Open Banking.
‘We continue to see interest from the retail sector in the data we provide, however the sales cycle in the space is taking much longer than initially envisaged.
‘Whilst this is frustrating, we have continued to build leads, with at least 1 (major global company) of those expected to close in Q3.’
HOW MUCH WILL INVESTORS GET BACK?
● An investor who invested £1,000 in the November 2017 Round, at a price per share of £0.05 in exchange for 20,000 Ordinary Shares, will be paid £131.60 as part of the Initial Payment £115.60 for the Deferred Payment
● Someone who invested £1,000 in the August 2019 Round, at a price per share of £0.06 in exchange for 16,667 Ordinary Shares, will be paid £109.67 as part of the Initial Payment £96.34 for the Deferred Payment.
The deferred payments is subject to claims may be issued as shares in the proposed buyer instead, according to Crowdcube.
But in its update to investors last week Niblock said the company had nine months of cash runway the board believed ‘raising additional growth equity would be challenging given the performance of the business, so it was decided to contact potential acquirers.
‘The process we initiated built on work undertaken during 2020. At that time an advisor led process to sell the Company identified a small number of interested parties, but produced no actual offers.
‘The parties who had shown an interest in acquiring Money Dashboard were contacted a headline offer of £8million was received. The Company’s board were satisfied that this offer represents the best terms achievable given the Company’s limited cash runway.’
The offer of £8million means investors – with the exception of the convertible loan note holders – will receive far less than their initial investment.
On 21 February, Crowdcube told investors in Money Dashboard that the company had served a so-called ‘drag along notice’.
It is a clause in an agreement that enables a majority shareholder to force a minority shareholder to join in the sale of a company.
Shareholders holding over 60 per cent of existing shares accepted the offer, according to Crowdcube.
The net price payable – on a cash free, debt free basis after repayment of the company’s convertible loan note instrument – is expected to be £3,417,530 £3million as a deferred payment, which will be paid on or around 28 February 2024.
It means the price payable payable for each ordinary share is expected to be £0.0124.
It marks a significant loss for investors who paid £0.05 per share in Money Dashboard’s first Crowdcube round in 2017, those who invested £0.06 per share in its August 2019 round.
In another blow, investors who participated in the 2019 round will lose any EIS reliefs claimed because it comes earlier than three years from the share issue date.
The sale will not affect EIS relief for the 2017 round.
In a statement, Crowdcube said: ‘When the company came to us told us there was a potential exit transaction, we worked very hard to ensure investors’ interests were represented protected.
‘This was a disappointing outcome for Money Dashboard its investors. We made sure Crowdcube investors were treated fairly, had their rights respected that they got as good an outcome as any other investor in the company.
‘As we make clear to all our investors when they join Crowdcube, there is a very real risk when investing in startups growth companies. Before investing, all investors must complete pass an assessment demonstrating that they understthe risks of equity crowdfunded investments.
‘We make it clear that investors should only invest money that they can afford to lose should build a diversified portfolio to spread risk increase the chance of an overall return. We also encourage investors in crowdfunded startups to diversify within that asset class, rather than pick just one company to invest in.’
Money Dashboard did not respond to requests for comment.