Eco Equity is offering convertible loan notes paying 15% per year. At the end of a 3 year term, investors will receive shares in the business. Investors’ funds are to be used to produce cannabis in Zimbabwe.
Its notes are currently being promoted via Facebook and Instagram, described as a “Secure Pre-IPO offer”.
Who is Eco Equity?
Eco Equity is headed by co-founders Jon-Paul Doran (CEO) and Timothy Ambrose (COO).
In addition to heading Eco Equity, Doran heads Axium Capital, an introducer of unregulated investments. In the last few weeks Axium Capital’s website was shut down for “scheduled maintenance”; prior to its shutdown it was marketing High Street Group bonds, under HSG’s alternative name of Keystone Property Group.
The FCA register shows that since February 2020 Doran has also been a partner in Farm Street Partners Investment Management LLP, which is the FCA-regulated company that signs off Eco Equity’s investment promotions such as the ones above.
Eco Equity Limited has been overdue with its May 2019 accounts since February 2020. This is a criminal offence under the Companies Act, and while such omissions are almost never prosecuted, an up-to-date picture of the company finances is essential to due diligence.
How safe is the investment?
Despite Eco Equity’s claims to offer a “secure pre-IPO offer” and that their notes “protect your cash with peace of mind”, these investments are unregulated corporate loans and if Eco Equity defaults – or if the shares investors receive at the end of the term cannot be sold – you risk losing up to 100% of your money.
The fact that investors are, according to reports, automatically paid with shares in the company after 3 years, rather than cash, adds an extra layer of risk compared to conventional loan notes. There is a material possibility of 100% loss if the company’s shares can never be sold.
One of Eco Equity’s ads asks investors “Tired of market uncertainty?” Given that the return Eco Equity investors receives depends entirely on what its shares can be sold for on the market, this ad is misleading. There aren’t many things more uncertain than what shares in an unlisted startup will be worth 36 months from now.
Should I invest in Eco Equity?
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 convertible 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 paying 15% per year is inherently very high risk. As an individual, illiquid security with a risk of total and permanent loss, Eco Equity’s convertible 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?
- Have I conducted due diligence to ensure the asset-backed security can be relied on?
If you are looking for a “secure” investment, you should not invest in convertible loans to startups with a risk of 100% loss.