Have you heard of Qazikoo EIS Shares?

phantasticalkat

My father investigated an investment option: Qazikoo EIS Shares. Since them we've been called and sent various documents. 
Have you heard about this? Is it legitimate? 
Apparently Qazikoo is a revolutionary banking service; secure, multi-currencies and aiming for unicorn status. They're offering us to buy shares through the Government's EIS (Enterprise Investment Scheme). Is it real? Here's some details:

Enterprise Investment Scheme (EIS) gives you 30% tax relief And up to 45% loss relief Earn 4% fixed dividends per annum *  Capital Gains Tax AND Inheritance Tax Free ** Invest in the latest challenger bank projected to reach a £1 Billion valuation within 3 years Enjoy growth and income with Qazikoo shares

Case 1: The company meets projections and you hold your shares for three years:Investment £20,000Share sales £5,000,000   Income Tax relief £6,000 (as a reduction in your income tax bill)   Capital Gains Tax £0 (Zero)Your gain £5,006,000 (£5,000,000 profit from the sale of shares plus £6,000 income tax relief)Total£5,026,000** Plus 4% dividends per annum on value of shares Case 2: The company value remains at £10,000,000 when you sell your shares:Investment £20,000   Share sales £20,000   Income Tax relief £6,000 (as a reduction in your income tax bill)Your gain £6,000 (from the income tax relief)Total£26,000** (equivalent to 10% profit per annum)** Liable for Capital Gains Tax if redeemed within three years Case 3: The company closes and your shares are worth nothing:Investment £20,000Income Tax relief £6,000 (as a reduction in your income tax bill)Government provided loss relief on at risk capital @ 45% = £6,300Your potential total loss £7,700 (£20,000 – (£6,000 + £6,300))Total£12,300

El_Torro

So you invest £20k and worst case scenario the company goes bust you still get to keep £12.3k?

Sounds suspect to me. Even if what they say is correct, any company in this scheme probably has a high likelihood of going bust so I'd rather keep my £20k than lose £7.7k of it. 

You know the old saying: If it sounds too good to be true it probably is.

I think the likelihood of never seeing any of the £20k again is far higher than the likelihood of making £5 million worth of profit.

Gary1984

It smells very fishy! The EIS scheme is real and if this investment qualifies then yes he can claim 30% tax relief and loss relief at his marginal rate of tax (i.e. A basic rate tax payer could claim back 20% of their total losses. The 45% relief is only for £150k+ earners).

How did he come to invest in this company? Did he find it an one of the EIS investment portals like seedrs.com? If so it's maybe legit albeit extremely high risk.

Did someone cold call him? If so it's probably a scam. Googling them comes up with a highly suspicious number of glowing news reports from websites I've never heard of calling it a 'future unicorn'. This and the insane £5m projection leads me to think it is a scam. Hopefully he's not in for too much. If it's £100 and he's treating it as a gamble then fair enough. 

wmb194

A quick Google suggests it's only raising a measly £9m and you can be sure it will be back for more and if you don't keep investing in future fund raising rounds your holding will become either more and more diluted or riskier and riskier as your holding grows in a tiny, unlisted, early stage company with no product yet (its target is to launch in September). I wouldn't touch it. It must be desperate if it's chasing small amounts from retail investors.

phantasticalkat

Thanks all. That's been really useful info. Luckily no money has been put down from us. And none shall be.
I hope this serves as a good source of information for others who found this investment offer, or been contacted by these people. Trying to find useful info on the internet was hard for me. Thanks again all. 

bowlhead99

wmb194 said:

 I wouldn't touch it. It must be desperate if it's chasing small amounts from retail investors.

It's not unusual for fintech startups to use crowdfunding of EIS capital for some of their money (despite also raising larger amounts from venture capitalists). One of the reasons that they like the model of having large numbers of private investors chip in is that 'word of mouth' is a great way for new 'challenger' businesses in a sector to gain traction and grow customers, because people who use the product and have a financial stake in the product are very likely to tell their friends about it. 

So in the last couple of years Curve, Freetrade, Monzo etc have all been looking to tap the public for funds despite not choosing to go public  Of course, they will not all succeed in their respective spaces and investors could lose their shirts, so should not invest shirts that they can't spare.  The risk is obviously a lot higher before the product is even fully launched.

Monzo is probably the highest profile UK one to have done a very successful crowdfunding and then go back to the crowd for £20m in 2018 alongside an £85m institutional fundraise at a 'unicorn' billion pounds valuation - they then took £100m+ of institutional funding eight months later at a 2 billion valuation.   The most recent 2018 crowd-fundraise saw over a third of their previous 7000 investors add to their holding at the higher valuation, while over 33000 others also put in money this time. You can bet all those investors are telling whoever will listen that Monzo is a great product - so giving away 2% of their equity for the free publicity was not necessarily a bad thing, nor does it imply they're desperate.

El_Torro said:

So you invest £20k and worst case scenario the company goes bust you still get to keep £12.3k?

Sounds suspect to me. 

The EIS scheme is an HMRC approved government scheme and if you invest in a qualifying company you really can have a reduction to your income tax bill for making the investment, together with a further tax deduction at marginal income tax rate if you make losses (i.e. you can set the losses against income tax instead of only against CGT). You can also defer capital gains made on other assets which may save you a capital gains bill by shifting a gain into a later year when it could qualify for an exemption.

However, just because the tax perks are great, it doesn't mean the company is legit or is going to be successful  It just means that when you sign up to pay a headline £20000, you are really only risking (say) £8000 (depending on your actual marginal tax rate), so you will think of it as an £8000 investment - but you may still lose all the £8000, and a 100% loss of any amount of money is not very nice when it happens.

Also, if the company doesn't get off the ground and meet the qualifying criteria, HMRC will never give it the EIS clearance (or may give it, but later withdraw it) so that what you thought was an £8000 risk is actually a £20,000 one because you have to pay back the income tax relief and can't claim the losses against your income tax.

The 'worked example' that shows that the downside is £7700 but the upside is £5 million tax free is of course something that plays to someone's greed, to draw in suckers. It's entirely unrealistic to expect a 250x return on an investment, even if it's a risky startup.  Even if they turn a £10m startup into a £10bn company (more than 99% of companies fail at doing that), there would be other investors coming in along the way to make capital investments to support its growth and massively dilute your stake in it.

From a quick google of the name I can see they've sent a press release about the fundraise to all manner of obscure and non-mainstream websites:

Many millennials are entrepreneurs and small business owners who need a high-speed, intuitive and modern online interface to complete their banking needs. Not only that, but millennials are constantly connected to one another through technology, so they also need a bank that recognizes how integral financialised globalization is to their personal and professional lives. Qazikoo is planning to check all of those boxes and more to become the premier choice of today’s young adults. That’s why it’s rumoured to be the next British unicorn!  

I take such commentary on pay-for-exposure blogs with a pinch of salt. Actually no I don't even take them with a dose of salt, I don't even bother to read them, other than to cynically quote excerpts from them.  Whether they ever get it off the ground, who knows. They may just take the £20k and pizsit up the wall. If they took their press release to Dragons Den, the panel would tell them to "eff off, I'm not investing in yet another fintech startup before it even exists, just to get a tax break".

The bottom line is that this is a high risk venture that your father should not really be looking at if he doesn't already have a very broad portfolio of conventional assets, VCTs etc and he can afford to completely throw the money in the bin.  The fact that they plan to use a government tax break is not an endorsement by the government.

And they are going to give you 4% 'fixed dividends' per annum? How will they do that, given a startup bank can't possibly make any profits in its first year? They would only be paying you with your own money, and without any distributable reserves, couldn't legally pay dividends.  I hold Lloyds and Nat West preference shares which yield 6-7% at current prices, and they are real multi-billion-pound businesses with plenty of reserves, but could still stop paying - the dividend stream is not 'guaranteed' (albeit they have to pay it in preference to dividends on the ordinary shares), which is why the yield is high.  Any company that advertises that is is going to start a business and grow to a billion pounds valuation but will pay guaranteed dividends rather than use its spare money to grow is, again, playing on your greed, just like the helpful "how much tax free profit would I make if I could sell my £20,000 of shares for £5,000,000" example.

No reason to touch this with anyone else's bargepole, let alone your dad's hard-earned savings.

wmb194

You need to work on being more concise, Bowlhead, but, "Since them [sic] we've been called and sent various documents" sounds like being desperate. I not aware that Monzo, Freetrade etc. were chasing people.

El_Torro

wmb194 said:

You need to work on being more concise, Bowlhead, 

I disagree. In general I find bowlhead's posts to be very informative, giving some much needed context to threads. I think many other forums users agree with this. 

There are some forum users (not mentioning any names) which are clearly very knowledgeable, but they give short and obtuse answers which don't really explain the situation. I prefer bowlhead's wordy posts to that. 

The point of my post: Don't change bowlhead99, you're doing great as you are

bowlhead99

wmb194 said:

You need to work on being more concise, Bowlhead, but, "Since them [sic] we've been called and sent various documents" sounds like being desperate. I not aware that Monzo, Freetrade etc. were chasing people.

If you make enquiries about funding opportunities for private companies, you would expect to receive documents and/or to be called. Monzo and Curve and Freetrade aren't going to call anyone because they have enough customers interested in investing that they will hit their fundraise cap on Crowdcube or Seedrs without even releasing key financial information. Whereas a company that's pre-startup doesn't have any customers and may need to be more active in its efforts.

There are some companies for which I clicked the 'request access to documents' on Crowdcube out of curiosity, decided not to invest, but still received follow up emails reminding me that the opportunity was still open. So it doesn't surprise me that many companies that are fundraising will follow up any live leads quite actively.

Still, as this company isn't using currently using one of the major crowdfunding platforms or regulated EIS fund managers and seems to be simply sending a press release far and wide through 'brand ambassadors', bloggers or other agents to try and hook people in, there is perhaps a big possibility that there is no real business and no reasonable prospect of them getting their funding target and that they'll never get it off the ground, even though people signing up will have sent them money and won't be able to get it back.

Like I said, just because a government scheme exists to incentivise private investment in early stage companies, doesn't mean that the government endorses this business or that it will ever actually start up the activities which would have allowed its investors to qualify for the tax relief. The suggestion of fixed dividends and the ludicrous example of turning a £20k investment into a £5m profit mean that they are perhaps just hoping to pitch to the gullible here.

Filtering for gullible people is a standard technique used by scammers, so that they waste less time and effort trying to convert smart investors who would ultimately drop out when the business plans looked too ambitious or generally started to smell a rat. Scammers would prefer to only pitch to greedy gullible idiots who would just go ahead and send the money. It is not worth them trying to convert the odd smart investor to their cause.

You see the same thing with advance fee fraud and Nigerian '419' scams. They offer high financial returns on effort and riddle their documentation with bad grammar and BS stuff that anyone smart would dismiss as not being genuine. But it is not because the scammers don't know how to use proper grammar. It's because they know that if people are dumb enough and greedy enough to ignore and look past the bad grammar and general implausibility of the set-up, they can probably convert a high ratio of those victims into cash.

So while EIS schemes are real, the exclusive private 'opportunities' you find out about by doing some 'research into investment options' on Google or Facebook and which involve a nice sounding gentleman calling you back, while sounding too good to be true, are - all too often - indeed too good to be true.

El_Torro said:

The point of my post: Don't change bowlhead99, you're doing great as you are

Cheers to that

Ponsh767

Has anybody heard anymore from Qazikoo? I see they’ve become a Mastercard Representative. Does this give anymore credence or credibility to their claim of being a worthy investment?

bowlhead99

Ponsh767 said:

Has anybody heard anymore

No.

I see they’ve become a Mastercard Representative. Does this give anymore credence or credibility to their claim of being a worthy investment?

No. This is not new news as it was circulating online on a couple of web pages dated before the time the thread was created. It appears in some of the 'pay to have an influencer talk about you' blogs which are generally written by spam farms or trainees and appear to have been through a language translation engine several times and translated back to english so that the grammar and structure is terrible but means that the article won't be the exact same in every place it appears.

Even if it were true (their website does not say), just because someone's company is a mastercard representative does not mean they are worth millions or billions. Mastercard have an express programme for fintechs to sign up and get rapid approval to be a card issuer without a lot of cost.  And you would expect them to have picked one of Mastercard or Visa otherwise their product would be DOA and nobody would want it. The fact they have the status (if they do actually have it) doesn't in itself make them investible.

The company's website shows logos of various news outlets, 'Featured by:' organisations such as BBC, Reuters, Telegraph, Forbes. There are no quotes or links to any decent coverage they've had. At the bottom of the site it says 'PRESS LINKS' but it is not clickable - the only clickable link is a hyperlink to a google search of their own name.  

They is no product product yet (launching allegedly in September) or an FCA registration, which one might think would be quite important for a 'challenger bank'. The idea that they created this entity, and - without publishing any credible detailed summary of what they will do and how - were swiftly able to get bloggers doing profiles of the founder saying the "target of 10,000 sign ups before launch was hit almost instantaneously" and that "this has pushed the valuation of his company up to £10,000,000 before even launching and a step closer to being the quickest company in Fintech to hit the billion-pound mark" would not fill me with confidence if I had committed my own money. The only real answer is that it is a load of hot air at the moment and the bloggers have given them a little bit of coverage because either the company has paid them to give it, or the bloggers do it for free because they want the practice or the exposure themselves.