William John (HV) Limited are offering an unregulated bond paying 20% gross over the 1 year term.
William John has previously issued bonds on the Irish Stock Exchange (via Audacia Capital plc) paying 7.5% to December 2022.
I asked William John to confirm that the 20% bonds were genuine and at time of writing (72 working hours later) have not yet received a response, so investors will have to verify for themselves that the 20% bonds are genuinely issued by William John and not a clone scam. The review below is mainly based on literature sent to a member of the public for the 20% bonds.
Update 22 May 2020: William John has contacted me to confirm that the 20% bond was genuine. They have also asked me to make clear that they are no longer offering 20% per year for new investments. [Update ends]
Investors funds are to be used to trade forex. The company claims to offer a “low risk, high performance investment strategy”.
Who are William John?
In its brochure, the founders of the company are named as Robert Holgate and Trevor Inch. Filings for William John Holdings Limited show that Holgate has now left the business (resigning as director in September 2018, although he continues to own a 5% share).
The current directors are Trevor Inch and Christopher Sephton. Trevor Inch owns the other 95% of the holding company.
Sephton was previously a director of Victory House Group Limited. Victory House Group is a subsidiary of Christianson Property Capital, which offered unregulated bonds paying 10% for a 10-year term, reviewed here in February 2018. Sephton resigned as director of Victory House Group in June 2017.
A balance sheet filed by William John (HV) Limited in June 2019 (when it converted to a plc) shows it had £91,672 in net assets as at May 2019. The company was incorporated in January 2019 and has yet to file full accounts.
Update 22 May 2020: This review previously drew on a filing from Audacia Capital plc relating to two other William John companies, William John (LV) Limited and William John (CC) Limited. William John has asked me to make clear that William John HV had no trading connection with Audacia Capital, meaning that funds raised from this particular HV bond were not, as this review previously stated, on-lent to William John CC Limited. I am happy to set the record straight. [Update ends]
How safe is the investment?
William John claims to have “access to a highly successful algorithmic foreign exchange trading program which has a proven track record over a number of years” (proven for whom is not specified; William John (HV) was not incorporated until January 2019) and offer a “low risk, high performance investment strategy”.
The reality is that if William John is unable to make sufficient returns from its forex trading to cover its costs and investor interest of 20% in one year, investors risk losing up to 100% of their money.
The use of the words “secure” and “low risk” to describe the investment are highly misleading. If William John’s investment was in any way “secure” or “low risk”, they would not have to offer 20% in a year to attract investors.
Asset backed investment
William John claims that its bonds are “fully asset backed” and that in the event of a default, investors would have first claim on its assets.
What assets would have in the event William John defaulted is not clear. As its objective is to trade forex, the main asset it will hold is whatever currency it has at any one time. If it later defaults on its debts then that would normally mean it has run out of currency.
William John states in its brochure that it has “undertaken a board resolution to maintain positive net assets at all times to ensure that the amount of Bonds issued will be covered by the net asset position of the Company”.
The fact that William John has decided at a meeting to maintain positive assets does not mean it will succeed. If, for example, its forex trading does not perform as expected and due to poor forex trades it ends up with less than it needs to repay investors 20% per year on top of any other costs it has, then its minutes are not going to change that.
William John goes on to say “…in this case assets minus liabilities must always be a positive ?gure and in most cases it is illegal to operate a company in the UK with a negative net asset position.” This is nonsense. It is not in any sense illegal to operate a company with negative net assets.
What is illegal is trading while insolvent (running up further debts when you know you can’t pay your existing ones), however a company with negative net assets is not necessarily insolvent. It is perfectly legal to carry on trading if there is a reasonable expectation it can turn the company around before its liabilities fall due.
Investors in asset-backed loans have been known to lose 100% of their money when it turned out that there were not enough assets left to pay investors after paying the insolvency administrator (who always stands first in the queue).
We are not in any sense implying that the same will happen to investors in William John, only illustrating the risk that is inherent in any loan note even when it is a secured loan.
If investors plan to rely on this security, it is essential that they hire professional due diligence specialists (working for themselves, not William John) to confirm that in the event of a default, the assets of William John would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what William John tells them about their assets.
The prospective investor’s professional corporate finance team could probably explain the difference between technical insolvency and actual insolvency while they’re at it.
Should I invest in William John?
This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.
As with any individual loan note to an unlisted startup company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.
Any investment offering returns of up to 20% per year is inherently extremely high risk. As an individual, illiquid security with a risk of total and permanent loss, William John’s loan notes are much higher risk than a mainstream diversified stockmarket fund.
Before investing investors should ask themselves:
- How would I feel if the investment defaulted and I lost 100% of my money?
- Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
If investors are willing to risk 100% of their money for a 20% return if William John’s algorithm is as good as they say, that is their choice. But the use of terms like “secure” and “low risk” by William John and their introducers should be considered a serious red flag.
If you are looking for a “low risk” investment, you should not invest in corporate loans with a risk of 100% loss.