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WiseAlpa Equity offer on Crowdcube

Evening amateur investors, I am going to blog about why I think WiseAlpa crowd fund is a good investment. Obviously, this is not investment advice, more like a ramble about why I am parting with my own hard earned cash to snap up a piece of this action.
So what is it? It “aims to be a world’s first lending market” – which is somewhat surprising, as I relatively sure that people around the world have been lending to one another via markets for thousands of years. Maybe it needs a little help with its elevator pitch. I would describe it is a peer-to-peer marketplace for corporate bonds, the world’s first, from what I can gather. There are other companies offering similar approaches, most famous is in the UK – Funding Circle – which is now estimated to be worth £960 million. These guys provide a platform for small businesses to issue debt, say of £100,000, and then individuals buy up tiny amounts of that debt, say £1000. The small business pays the interest on the debt, which the individual receives as interest, the platform takes a cut. This approach is interesting as business-lending is notoriously difficult, even with successive attempts by the UK Government and the Bank of England via its Funding for Lending schemes. Individuals with capital currently have it sitting in a bank account probably making about 3% interest, without considering inflation is now running at 2.9%. So basically Funding Circle links up people with money to companies who want to borrow, and if all goes well, everyone benefits.

 

So on to WiseAlpa. Well the corporate bond market is a $5 trillon a year industry, based on these figures from the Financial Times. As WiseAlpa point out, this debt issuance is only available for high wealth and sophisticated investors, as one would usually need make a minimum purchase of $100,000 – not really walking around money for me. Peer-to-peer has the potential to revolutionise pretty much the entire financial industry, if not many other industries, so I can’t see why it won’t gain a chunk of the corporate bond market. Especially as this Economist article states that the industry appears to be stuck in the 1970s, with 80% of corporate bonds sold over the phone. There is also a trend where UK and European companies are issuing more bonds opposed to obtaining bank loans. This Reuters article discusses how although bonds are making up a greater proportion of UK and European corporate debt; 28% and 12% respectively, it’s still below half the level of the United States at 44%. Finally, there has been discussion that I am struggling to find a link for, that the issuance of corporate bonds is less “systemically” risky. What I mean by that is that why the financial crisis hit and the banks went down, it had the potential of bringing down the whole system because of endless hidden loans and debt instruments. In theory, bond lending is less risky as only the person who takes the bond loses out. Although don’t quote me on that, as I’m sure the financial elite will work out a way of bringing down the system with corporate bonds.

So what do we have; a massive market, an era of digital-led technological innovation that is seeing more peer-to-peer business models and a system-wide desire to encourage a greater use of bonds for debt issuance. AlphaWise seems like it is well placed to attempt to take advantage of these conditions. It currently sports a solid list of clients including; Aston Martin, Iceland, Virgin Media and New Look, all offering bonds through the platform to everyday investors. They also seem to be getting a lot of good press within the financial industry. If WiseAlpha manages to meet the aspirations of a peer-to-peer platform for corporate bond lending, it may have a similar valuation as Funding Circle. Which would be growth of about 150x from its current £6million valuation. Maybe one day. So if you want a piece of the action, you have just over a week to sign up to Crowdcube and register your investment. Ensure that you only invest what you can afford to lose and make sure you understand the risks, don’t just take advice from a guy killing time when he should be working. Good luck.

Stuart Bowles

Stuart Bowles

Stuart Bowles is a PhD Candidate at the University of Birmingham. He has background in sustainability, socioeconomic processes, financial innovation and social enterprise. His PhD explores the role alternative financial innovations including cryptocurrency will have in society, especially towards meeting the objectives of sustainability.

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