You can ignore most P2P 'news'
Imagine that you are hired by a P2P investment site. Your job is to publish content that is going to grab people’s attention. What do you talk about? It’s not easy. That’s why we often receive lots of dull emails each month to announce things that no one really cares about. For example, the hiring of a mid level executive, or being nominated for an award that no one has ever heard of before.
But what is actually worth knowing right now if you are an active P2P investor? Below are 7 recent developments in P2P that have caught our interest.
What's going on?
EstateGuru has been busy raising capital from investors to support the growth of the business. EstateGuru began operations in the Baltic region but it is aiming to grow in larger markets in Europe. It already offers loans from Germany on its platform, and hopes to launch in the UK before the end of this year. In September it announced that it had raised €5.8 million in a ‘Series A’ funding round. This was partly raised from the crowdfunding site Seedrs, and partly from British Venture Capital firms. The latest pre-money valuation was €49m. The new valuation of EstateGuru is 75% higher than when EstateGuru last raised funds on Seedrs in 2020. Many of EstateGuru’s investors participated in the 2020 share sale. The new higher valuation, gives them a large ‘on paper’ profit on the shares they purchased.
British site Zopa is widely considered to be the world’s very first P2P site, starting in 2005. Unfortunately, Zopa has not been able to translate this first mover advantage into much financial success. Zopa has made losses in most years. It has now obtained a UK banking licence and it has put its P2P operations ‘under review’. We expect this review to lead to the decision to make an orderly closure of its P2P operations. To make things worse, Zopa has been experiencing significant issues with its technology recently. This has prevented it from issuing new loans, and caused significant disruption for its customers. Zopa plans to raise new equity to cover its losses and ensure it has enough regulatory capital. It looks like Zopa’s future will be as a small bank – exactly the type of business model it was established to disrupt 16 years ago.
Viventor is a multi lender P2P platform. It has announced it is closing to new investments. The reason given was that it would be too expensive to obtain the necessary licence from the Latvian regulator. We think there is likely more going on than is being stated publicly here. Either the regulator has told Viventor that it probably won’t receive an approval, or the shareholders have decided that the site will not generate the revenues and funding they were looking for. Viventor has admitted that some of its loan originators may not be able to repay investors on time as a result of the loss of their access to new funding from Viventor. Viventor started strongly but suffered from under-investment and multiple changes to its ownership and management structure. We were not too surprised to see the announcement that it was winding down – we are just glad to see that it is taking place in an organised manner.
‘Fast Invest‘ is a site we have never featured at Explore P2P as we had some very strong doubts about whether it was a legitimate site when we assessed it. P2P blogger Kristaps Mors set out many of the red flags we could see in an excellent post last year. The Ponzi scheme operated by Bernard Madoff ran successfully for many years until the 2008 financial crisis that caused a spike in withdrawal requests. It seems plausible that Fast Invest may have run into a similar situation with the Covid crisis leading to more investors requesting their money back. If amounts owed to investors are held in segregated bank accounts, these withdrawal requests should not cause any problems. Instead it seems that no investors have received any payments from Fast Invest at all for several months now. There are now hundreds of negative reviews of the company on Trustpilot from investors about this situation (and a few positive ones that appear to be fake). Fast Invest claims that the withdrawals are delayed due to Covid and are still being processed. Unfortunately for those involved, we don’t think it will be too long until this site, and the money invested, disappears.
We have been fairly critical of P2P site Crowdestor over the last few years. We’ve regularly highlighted loans that they have listed that seemed too risky, or lacked sufficient analysis of the risks and financial information. We also questioned whether the small Crowdestor team had the knowledge to be able to properly assess the risks of loans that were in a huge number of industries and different countries around the world. After much delay, Crowdestor has now for the first time published its lending statistics (see here). We can see that around half of the loans issued by Crowdestor are now in arrears or recovery. That’s a very poor outcome, even after taking into account the impact of Covid. We can also see that the amount of new investments made during 2021 so far is only €8 million. Crowdestor faces a very challenging future. We still think there is a space in the P2P market for high risk loans – however it requires very experienced and capable teams of loan underwriters and workout specialists.
Since Moncera launched we have highlighted that Moncera is one of the best P2P opportunities for investors, as it offers loans from one of our highest rated loan originators, Placet Group. Moncera seem to have been overwhelmed with the amount of investor funds that have moved to them, which has resulted in them cutting the interest rates paid to investors, and cash left sitting uninvested. If you are an investor at Moncera we would recommend checking your account to make sure it is being fully invested and that you are earning returns you are happy with. It may make sense to invest any uninvested funds elsewhere until Moncera is better able to match supply and demand. Moncera has recently started to offer loans secured with real estate – this is another option for investors who want to make sure their funds are being fully invested.
HeavyFinance is a fairly new P2P site that focuses on lending to farmers. It has had a successful start, with over €10 million of loans already funded. HeavyFinance secures their loans against heavy machinery (combine harvestors, tractors etc) or land as collateral. HeavyFinance recently announced that it now offers some loans that receive a guarantee of up to 80% from national governments. That means that investors face a maximum loss of only 20% of the amount they invest in these loans, while receiving the full amount of interest. As most loans have interest rates that are 8-12% we think that makes the loans offered by this site very interesting as the downside risks are limited, while still earning attractive returns.
Where to invest
Thinking of adding to your P2P investment portfolio? Then check out our bonus offers page, that contains a list of all the promotions currently being run by P2P sites that would like you to become a new investor.
Our comparison tables list all the reputable sites that are available to investors, by category. You can also find our current Top-10 list of P2P sites.