the times | Thursday December 3 2020 1GM 53
Business
Technology options trades worth bil-
lions of dollars are to be unwound by
Softbank after a backlash from inves-
tors over heavy losses.
The Japanese group will allow the
options to expire in the coming weeks
after losing about $2.8 billion from
derivatives trades that went bad.
The trades were made by SB North-
star, a subsidiary set up to invest in
American technology companies. As
well as taking long positions in well-
known US groups, it also embarked on
big derivatives trades, which generally
carry higher risk.
SB Northstar is one third-owned by
Masayoshi Son, the billionaire founder
of Softbank, one of three executives
with the final say on trades. Analysts
have questioned the ownership struc-
ture, saying that Mr Son, 63, holds too
much power over other investors’
money.
For the three months to September
Softbank unwinds options
trades amid investors’ fury
this year, SB Northstar reported
derivatives trading losses of $2.8 billion.
It said that it had invested $20 billion in
technology companies by the end of
September, of which $3.4 billion was in
the form of equity derivatives.
About 90 per cent of SB Northstar’s
options will expire by the end of this
month, according to Bloomberg News,
which was first to report Softbank’s un-
winding of the trades.
Softbank’s derivatives purchases are
thought to have added fuel to a huge
rally in US technology shares this year.
The Wall Street Journal estimated that
at one point Softbank had options that
gave it exposure to technology stocks
worth $50 billion. SB Northstar holds
significant long positions in several big
technology companies, according to a
regulatory filing. By the end of Sep-
tember it had invested $6.3 billion in
Amazon and $2.2 billion in Facebook,
among other bets.
Softbank did not respond to requests
for comment.James Dean US Business Editor
Ben Stanway is not short of ambition. “I
think we could have a bigger customer
base than Hargreaves Lansdown, based
on the current trajectory,” said the co-
founder of Moneybox, one of dozens of
start-ups trying to nibble the lunch of
the mainstream finance industry.
Hargreaves, of course, is the elephant
that dominates retail wealth, weigh-
ing in at £7 billion and sitting comfort-
ably in the FTSE 100 with Britain’s
other corporate super-heavyweights.
Moneybox (full name Digital Money-
box) is an upstart, smartphone-based
digital wealth manager valued at
£154 million at its last capital-raising.
Started in 2015, it is growing at a
phenomenal rate, with about 200,000
new customers in the past 12 months,
mostly millennials, boosting its cus-
tomer base to 509,000. Hargreaves, in
contrast, has 1.4 million customers, but
is growing at a slower 188,000 a year.
The difference is that Hargreaves’
clients are generally old and rich, while
Moneybox’s are in their twenties and
thirties, with typical assets of only a
couple of thousand pounds and un-
likely to produce serious revenues for
Moneybox until they are older. Har-
greaves has £107 billion under manage-
ment, Moneybox £1 billion.
The challenger offers cash savings
products and a range of stock market-
linked investment options to its clients
through a service that enables them to
round up every shop purchase to boost
their savings at the touch of a smart-
phone. It believes that it is making in-
vesting simple and accessible to a new
generation.
Probably it’s greatest coup is in lead-
ing the industry with lifetime Isas, or
Lisas, state-subsidised products
that help customers to save for the
deposit on their first home. Mr
Stanway, 39, believes that Mon-
eybox is the biggest provider,
with 200,000 Lisa clients, a num-
ber growing by about 10,000 a
month.
With a juicy source of would-
be homebuyers, he is plan-
ning to harness that
market position by
launching a mortgage
broking service early
Aiming high by thinking outside the box
next year to challenge an industry that
includes Charcol and London & Coun-
try, as well as a string of smaller players.
Moneybox has signed a partnership
with an unnamed mortgage network
that will provide some of the adminis-
trative tools, while the company will
build its own team of advisers — 50 to
60 of them by the second half of 2021,
according to Mr Stanway.
Mortgage broking works by connect-
ing potential borrowers with banks and
building societies and taking a pro-
curation fee of around 0.35 per cent of
the loan agreed. It’s a perfect fit for a
business with so many Lisa-holders.
Moneybox will launch an experimental
or “beta” version within weeks, using
staff and shareholders as guinea pigs,
ahead of going live early next year. It
will be a key test for the company’s
ability to extend its product range, build
a closer relationship with its clients and
justify the hope invested in it.
Like most fintechs, Moneybox is
heavily lossmaking, chalking up a
deficit of £7.8 million in the year to May,
up from a £5.1 million loss in the previ-
ous year. Revenues last year were a tiny
£2.5 million. But it can afford to burn
through cash for several more years,
having raised £32 million from institu-
tional investors in March and then
beefed up its balance sheet further in
the summer through a crowdfunding
exercise. It was, Mr Stanway said, the
second most popular crowdfunding in
Britain, with 16,000 new shareholders,
many of them Moneybox customers,
signed up and injecting another £7 mil-
lion into the business.
Mr Stanway is a former equity ana-
lyst at Fidelity International, where he
worked with Anthony Bolton, one of
the most highly regarded stockpickers
of his generation. Mr Bolton, now
retired, was the biggest individual
investor in Moneybox, while Fi-
delity itself is also an investor,
with 20 per cent. Sir James
Leigh-Pemberton, the City
grandee who now chairs the
Rothchild family’s RIT Partners
investment trust, is another
backer. So is Leif Kvaal,
the media-shy hedge
fund tycoon who
built Habrok Capi-
tal, where Mr Stan-
way also worked
Mr Stanway,
Charlie Mortimer,his co-founder and a friend from
schooldays at Charterhouse, plus other
Moneybox staff own in the region of
35 per cent of the business. Eight Roads
and Oxford Capital, the venture capital
groups, are also investors.
Mr Stanway is also the co-founder of
another digital platform, this one sell-
ing flowers. Bloom & Wild is claimed to
be Europe’s biggest direct-to-consumer
florist, though he takes no active part in
the business now. Moneybox, which
has 170 employees (all working from
home), now takes up his time as he tries
to build it into a mass-market company.
He acknowledges that ultimatelymany financial technology start-ups
will fail or will be taken over and that
Moneybox will soon reach a critical
juncture. “By year four to year seven,
you’ve got to show you have robust
underlying economics,” he said.
“You’ve got to show you have a place in
people’s lives.”
He scoffed at any suggestion that
Hargreaves, the company he wants to
overtake, could snaffle up Moneybox in
a single mouthful. “That is definitely
not in our plan,” he said, before adding
“never say never”. Instead, he can see a
flotation for Moneybox, “in two to
three years, at the earliest”.Patrick Hosking Financial Editor
Ben Stanway can see
a float for Moneybox
Mr Stanway is also the co-founder
of Bloom & Wild, the online florist