Monzo boss sticks by using debt to buy shares

The founder of Monzo said yesterday that it was not his place to judge how customers should spend their money as he stuck with plans to allow customers to use debt to buy unsellable shares in his fast-growing bank next week. Tom Blomfield, who owns a £78 million stake in the smartphone-based bank, emphasised that he was not encouraging people to borrow to buy the shares in the crowdfunded capital-raising, but he stuck with his plan to allow them to use Monzo overdrafts to do so. Which?, the consumer group, waded into the row, accompanying its decision to name Monzo the “best bank in the country” yesterday by urging any customers considering borrowing to finance a share purchase “to think carefully”. The controversy was sparked by a report in The Times yesterday, which revealed that the bank, which is attracting 100,000 new account-holders a month, had decided to allow customers to go overdrawn to buy its shares. The Campaign for Fair Finance called the decision irresponsible, while the Financial Conduct Authority cautioned people against borrowing to buy shares. In his blog Mr Blomfeld accused The Times of painting a misleading picture and was supported by fans of the bank on Twitter and its online forum. He conceded later that there was a moral issue and said that he had considered restricting people using overdrafts to buy shares. He told The Times that a ban could be “a slippery slope”, and added: “We think individual freedom trumps the risk. Should you ban people from using overdrafts when they go to the pub?” He defended the bank’s online forum, which published customers’ bullish opinions of the value of Monzo shares and plans to snap them up in a way not allowed in a public flotation. Mr Blomfield said that Monzo had made it very clear that they could lose their money and that the forum was moderated. Monzo’s last crowdfunding was fully subscribed in 96 seconds, leading to enthusiasm for next week’s £20 million crowdfunding. Only its 1.2 million customers are eligible, of whom 600,000 have an approved overdraft. Jason Hollands, managing director of Tilney, said that the arrangement left him “quite uneasy”. Dennis Hall, founder of Yellowtail financial planning, termed it “unethical”. Sarah Coles, personal finance expert at Hargreaves Lansdown, said: “People should not be getting into debt to invest — doing so with an overdraft is hideous.” Listed banks are forbidden from lending to people to buy the the bank’s own shares. As a private company, Monzo is not bound by those rules, which do not appear to apply to overdrafts in any case. Click here to read the full story: https://www.thetimes.co.uk/article/monzo-boss-sticks-by-using-debt-to-bu...