Carlauren Group (aka The Care Home Group, whose care home investments offering fixed returns of 10% per year were reviewed here in April 2018) has entered the cryptocurrency arena with the launch of “C-Coins”.
How it works is as follows:
Investors and those wishing to buy Carlauren’s care home services hand real money over to Carlauren in exchange for tokens at a launch price of £70 per C-Coin. Members of the Carlauren Resorts programme have the right to buy a specified number of C-Coins at £70 depending on what tier of membership they join at.
Investors and members can either use their C-Coins to pay for Carlauren’s residential and care home services, sell them back to Carlauren at a “guaranteed” £63 per coin (90% of the launch price), or sell them on an internal exchange operated by Carlauren, known as the Carlauren Coin Exchange.
Going forward C-Coins will be the only method of payment accepted by Carlauren for its services.
C-Coins will be the only way to pay for Carlauren rooms, therefore the group expects a high demand and an increase of its core value. -Carlauren press release
Potential as an investment
The value of C-Coins is wholly dependent on the fortunes of Carlauren as a business.
Firstly, the “guarantee” to buy back C-Coins for £63 in fiat currency depends entirely on whether Carlauren has sufficient liquid funds to honour it.
Secondly, as long as new Carlauren members can get C-Coins for £70, they are unlikely to want to buy coins on the open market for more than this.
Thirdly, C-Coins have no underlying demand other than to purchase Carlauren residential and care services. This means Carlauren essentially sets the real value of the coins by determining how many C-Coins are required to buy a given Carlauren service.
The buy-back guarantee
In January 2019 Carlauren Group Limited filed its accounts for the year ending December 2017, three and a half months late. (Carlauren Group twice used a loophole in the Companies Act by shortening the accounting period by a single day, which extends the deadline by three months, to avoid being officially overdue.)
The accounts show that Carlauren Group had net liabilities of £610k and made a loss of £469k. Due to Carlauren Group’s small size, the accounts were not independently audited and did not include a profit and loss account. (The loss figure is derived from movement in the “profit and loss account” line item.)
The company says that they consider themselves a “going concern” on the basis that “The parent company and the controlling party have confirmed that they have the ability and will continue to provide financial support to the company”.
This statement does not make a lot of sense because Carlauren Group Limited is the parent company. That leaves only one source of financial support which is the controlling party and director, Sean Murray.
Investors should not rely on Sean Murray continuing to put his own money into Carlauren so that investors can cash out their C-Coins at £63 each. The financial position of the Carlauren Group should cast doubt over the company’s “guarantee” to buy back C-Coins at £63.
In the above press release Carlauren Group represents to investors that they can expect an “increase of its core value”.
However, the more the price of C-Coins increases on the internal exchange, the more expensive Carlauren’s services are (if new residents have to buy C-Coins on the open market over and above the coins they can buy at £70), and the more likely customers are to use an alternative care home provider that accepts fiat currency.
Or, in the case of existing members, to sell their C-Coins on Carlauren’s internal exchange and then buy residential / care services from another provider in fiat currency.
Indeed, it is questionable how many of Carlauren’s target market – predominantly the elderly, or their attorneys – will want to mess around with exchanging money for C-Coins and then using C-Coins to buy care home services in the first place.
As C-Coins have no underlying purpose other than to buy Carlauren Group’s care service, this means that in reality there is a ceiling on the value of C-Coins imposed by the market value of care services.
Supply and demand
Unusually for an Initial Coin Offering, Carlauren does not provide a “white paper” describing how the supply of C-Coins is controlled.
While Bitcoin and most of its competitors have the supply of the coins controlled by a mining algorithm which restricts how many coins enter the market (and eventually caps it entirely), there is no mention of any mining algorithm in Carlauren Coin Bank’s literature. Indeed, it says that the only three ways to acquire C-Coins are to become a member, accept C-Coins in lieu of fiat currency as an investor in one of Carlauren’s care home suites, or buy them on the exchange. Mining is not mentioned.
This suggests that Carlauren Group is able to create as many C-Coins as it likes for as long as investors and users are willing to hand over real money for them.
This lack of restriction on the supply of C-Coins further undermines the potential for C-Coins to increase in value.
Should I invest in Carlauren Group’s C-Coins?
The attraction of C-Coins to Carlauren Group is obvious. Due to the apparent lack of a mining algorithm, they can generate C-Coin tokens at will and exchange them for £70 of real money for as long as investors are willing to hand it over. They can also defuse their historic liabilities for any investor in their care home suites who is willing to accept interest in C-Coins.
For investors the attraction is less clear. With the market for care home services holding down the value of the coin, I wouldn’t expect this one to “go to the moon” (in crypto parlance) any time soon. As for those who aren’t interested in the coin as an investment and just want to buy care home services, it seems an unnecessary complication.
If Carlauren Group becomes unable to meet its buy-back guarantee or provide residential / care services in exchange for C-Coins, the bottom will fall completely out of the market. Investors should ask themselves before investing in C-Coins:
- How would I feel if the market for C-Coins collapsed 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 you are looking for a “guaranteed” investment, you should not invest in tokens issued by a small company with a negative balance sheet.