Fintech boss warns of SME shareholder 'bubble'

The co-founder of peer-to-peer trading site AssetMatch has warned of a massive equity bubble among small and medium enterprises, saying that investors are being increasingly ‘locked in’ to long-term investments.

Stuart Lucas, co-CEO of the trading site, told Digital Look that there is an estimated £300bn tied-up in private equity in the UK with a lack of readily accessible exit opportunities.

SMEs make up about 99.9% of all private sector businesses in the UK, with the total number increasing by 97,000 since 2015.

Lucas points towards the rise of crowdfunding as a way of funding companies as one of the drivers of the ‘bubble’ among private equity outfits, and called on the Financial Conduct Authority to get tougher on regulating the practice.

"Locked-in equity is in excess of £300bn, in part due to the surreal world of crowdfunding. I’m concerned that regulators are not doing enough to combat companies being funded in this way with about a 70-80% failure rate amongst such firms," Lucas said.

"I think the FCA should take a hard look at themselves when regulating such funding practices, as the quality of some of these companies is suspect."

WHAT BREXIT?

Lucas also hit out at business leaders who have warned of a negative impact surrounding the UK’s departure from the European Union, adding that it was being used an 'excuse' for potential underperformance.

"Some companies have been flagging up potential concerns about Brexit, but for many it appears to be that they see themselves struggling during the next year or two and they use it as an excuse to fall back on," Lucas said.

AssetMatch was born out of Lucas and partner Ian Baillie becoming increasingly frustrated at their own inability to negotiate quick exits from investments.

"There must have been a better way of doing things," the company’s co-founder said.

"It works for companies who want to list on our site as they avoid fees associated with markets such as AIM, while investors are happy as they’re able to access liquidity quickly."