Great British Recapitalisation anyone? One of the issues that will surely become a hot topic come the end of the Covid-19 epidemic is the refinancing of the British economy. Below, we run an extract from an article that posits one certainty: equity raises will be a key part of the recovery plan. If existing shareholders just sit out the rights issues, they will find themselves “diluted” – ie, their shareholding will be a radically smaller proportion of the company they own.
Retail investors must be allowed to participate in new fundraises by listed companies, according to investment platform PrimaryBid, which has today published an open letter to bosses.
The open letter addressed to “the boards and management teams of the UK’s listed companies urges boards to involve “individual shareholders and employees”, alongside institutional investors, in any discounted cash raises.
Anand Sambasivan, CEO and co-founder of PrimaryBid, said: “Retail investors should be afforded the same protections and participation rights as other company shareholders. The technology now exists to include retail in these fundraising details without compromising on timetable or execution.”
“Coronavirus has put significant pressure onto many of the UK’s listed companies who now need to raise equity, including household names with large retail investor followings. It’s only fair that those retail investors can be part of a Great British Recapitalisation,” he added.
Following the publishing of the letter, thousands of retail investors have reportedly signed up to use the platform.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.