Warning signs - what can we learn from FC ?

The fact that employees had no lock up period post-IPO on their shares, which they dumped hence the immediate post-IPO crash

Going off at a tangent a bit but relevant due to the ongoing loss making situation at FC …………………….

I would recommend looking up the statutory accounts for these P2P companies that are required by law to be filed at Companies House.

Not many P2P companies are profitable. Several are inadequately capitalised and do not have enough cash to gain sufficient traction in what is an overcrowded marketplace. This all makes future fundraising rounds more difficult. I would expect a number to go out of business in due course.

The worst case I have found is Property Partner, which is a trading name owned by London House Exchange Limited

The LHE financial year is the calendar year, i.e. 1st January to 31st December. LHE has filed accounts for 2015, 2016 and 2017. It has not yet filed accounts for 2018. The accounts, which are signed off by external auditors give the following results in £.

Year 2015
Income - £379,055
Loss - £4,247,024

Year 2016
Income - £991,406
Loss - £7,247,698

Year 2017
Income - £2,022,363
Loss - £5,945,622

The Balance Sheet at 31st December 2017 showed cumulative losses over several years of £17,964,565 and a Balance Sheet net worth (estimated liquidation value) of £2,929,102.

We do not know the financial position of LHE from 1st January 2018 onwards. However, it is legitimate to ask if LHE will run out of cash if it cannot transform losses into profits and cannot raise further capital in new fundraising rounds.

This week, Property Partner announced hefty fee increases for its investors.

Coming back to the original request on this thread, in my view there is lot to learn for some investors from the current happenings at FC. Here's a few points. Note this doesn't exclude blame on FC's doorstep, but what FC do isn't in our control, whilst what we choose to do is:

1) P2P should never be a fire and forget investment unless you happen to be entirely sanguine about the prospect of losing your capital and/or losing it for extended periods of time. This includes 'low-effort' platforms like AC, FC, RS, LW, GS, LC.

2) If you are sufficiently motivated to have a good moan here about the bad thing that happened to the money you care about, then next time you invest you should probably acknowledge that you should have read more from the same source before you invested. There are hundreds of posts about the (poor) quality of FC's loans, the withdrawal of their loanbook stats, the fact that they hide poor performance with misleading frontpage statistics, and varied/many other aspects.

3) Investors should not confuse platform aspirations ("we have a secondary marketplace where you can sell your loans"/"target return of X" with guarantees).

4) It seems quite a few people didn't bother to look at the loans they were assigned. It doesn't take a sophisticated investor to read many loan descriptions before alarm bells start ringing.

5) What FC is doing now is unpleasant, unfortunate etc, but pretty much exactly in the realm of risk that an average P2P investor should expect to encounter. Which is why some less experienced investors feel "got at" by others on this forum. We're (by and large) not trying to goad you, but if you want to move on from this then you have to accept some responsibility.

So, rather than try and pick up the spilt milk whilst your 'Funding Clogged' investment is selling (and it eventually will, and recoveries will eventually occur so it probably won't be as bad as all that) then you're probably better off looking at any other investments you have running, like that platform that's always reliably paid up interest without you having to lift a finger. 

How are it's statistics doing? Have you looked up any of the companies they're lending to to see how they're really doing? Is their loanbook static/expanding/decreasing? Are you perhaps lending too much in light of how you feel about FC? How are their financials doing? What if the whole enterprise went pop completely out of the blue, like Collateral? Is anyone on this forum or other forums raising any concerns you might want to look into?

Can't be bothered/don't have time to look into the above? That's fine, but just don't always expect huge ladles of sympathy when a risk event that is perfectly within the normal bounds of P2P actually happens.

I'd just like to pick up on the perils of "fire and forget". I think there is an important distinction to be made between (1) investments where you have no control over the loans you get but are tied to the outcome of those specific loans and (2) investments where the risk is fully pooled. And, of course, (3) transparent models where you have full visibility and control (eg FC as was, AC MLA and many others).

The current FC model is clearly of type (1), as is AC's GBBA/2 and PSA.

The GS offering is type (2), as is (I think) RS. AC's access accounts are like this - up to a point! I can't comment on LW and LC as I'm not familiar with those.

If the risk is fully pooled then there isn't much point in following individual loans, even if it were possible. "Hands off" works here, at least up to a point - one should still keep an eye on overall performance/coverage ratios/PF levels or whatever, but that can be done in much slower time than trying to follow individual loans in a type (3) model.

FWIW I think that type (1) is to be avoided like the plague. I have active investments in both (2) and (3), and am happy with that for now

Agreed. And I don't have enough skin in the game or hours in the day to try to stay ahead of the BHs, so there is no point in trying! You just have to know and accept the risk, if you want to.

Funds going into or out of the loan book are not directly related to FCs own cash flows.


However reduced investing/borrowing reduces FCs fees, increases losses and increases the cash burn which would eventually take FC out. At that point FC will be taken over for peanuts by someone who thinks they can turn it round or the P2P protection run off kicks in.

Under the run off the loan book is run out and the recovery term continues until complete. However this is the run off risk with recoveries – how motivated will anyone be to pursue recoveries?