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Mercantile update - June 2024
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The default on investor coupon interest payments has reached four months. On the 17th June 2024, a letter was circulated to some (but let’s assume it to be all) investors. This is it...
If you had suddenly stopped paying people what they are owed, when they are entitled to receive it, without warning and for an extended period of time, causing them to really worry about the security of their money, wouldn’t you at least try to personalise your letter instead of “Dear Investor”? Make an effort, guys. It’s like you don’t care.
Anyway, what does this letter tell you? Unless I’m reading this wrong, the answer is “very little of any substance”. Let’s not try to dissect every word of it, let’s ask the questions “Why haven’t you paid people?” & “When are you going to pay?”.
Essentially, the reasons offered for their default are:-
1) Issues with making third party payments due to changes in UK regulations.
2) The long-serving UK based paymaster closed unexpectedly.
Ahh… so, over all this time you have had the money that you owe to everybody, but have been prevented from paying anyone at all…
Really? Then it is possible to clearly demonstrate to stakeholders that this is the case. The directors could be able to show that investor money is safe and always was, couldn’t they? Of course, and there would be independent verification for this...
Why is this important?...
Because it would prove that the company is solvent & has been all along.
Because it would also show that there have been profitable trades and that past coupon interest payments hadn’t been paid from now-exhausted investor capital.
Because it would also provide evidence to support their letter by unequivocally proving its implication that the money has resided in the UK, with Mercantile, over all this time and, as such, was indeed subject to UK regulations, changes to which has indeed prevented them from paying anyone.
Instead, there is a vague reference to “investment partners” making payments. Who are these “investment partners”? Are they UK based? If not, did these funds need to come through the UK?
Do they hold all the money, and if so, how does Mercantile remain solvent and able to pay its liabilities?
What real power or influence do the directors of Mercantile have over these “investment partners” and therefore your money?
Is this the next excuse for non-payment that will be offered by the directors – “it’s not us, its our investment partners”? After all, we already have “It’s the UK laws” and “its because of our paymaster”.
This may remind readers of a famous scene from the film “The Blues Brothers” where Jake, finally confronted by his ex-fiancée, rattled off a long list of ‘reasons’ why it wasn’t his fault for leaving her at the altar. Similarly, it seems that it’s never their fault.
(A reminder here, if you feel the need Blues Brothers - It Wasn't My Fault! (youtube.com) )
We could also revisit the question of if any of the directors have been able to extract monies at any point since the insolvency crisis began, and, if so, how?
Anyway, it’s a company based in the Seychelles – if they had the money, or could efficiently access it, then wouldn’t you have expected that there was some route, some alternative means to pay people? If not, then why not? Why has it taken this long to even tell anyone about it?
If the money was outside the UK, then why hadn’t the Directors contacted all affected stakeholders and described these alternative options or mechanisms they had available to pay… and then pay?
The directors of Mercantile appear to have the belief that they can pick & choose when & what UK laws apply. For example, these new UK regulations on Third Party Payments apply, yet standard UK Company Law on corporate insolvency and creditor payments doesn’t. There isn’t a set of rules or even any standards that you can fall back on here. You don’t have your money, hopefully they do & its only them who can get it back for you.
There appears to be some paralysis amongst some creditors & investors - If you upset Mr. Robinson or Mr. Imperato by chasing what’s owed then they may decide not pay you at all.
Someone reminded us of that old saying “if someone owes you a dollar, it’s their problem. If they owe you a million dollars, it’s your problem”. Whether it started out that way or not, there is reason to believe that its more than just a saying and it has now become the cornerstone of how Mercantile does business. Owing too many people too much money gives you a warped sense of power.
If they have struggled to get enough money out to pay your coupon payments – which is a relatively small fraction of the overall investment – then how assured are you/they that they can get your whole investment out, either at the end of the investment, at a certain applied redemption point or, indeed, if a reasonable director would conclude that the level of unmitigable risk to investor monies is too high?
Ahhhh… but you knew the risks! If Mercantile are doing things with your money that you were not told about, that materially altered the risks of your investment then the terms of your investment are not as disclosed in the IM. Especially if you now have firm reasons to doubt the legitimacy of that document.
So then, what about the second question we asked - “When are you going to pay people?”. You won’t find a definitive answer in that letter. They are “hopefully” commencing payments this week. But, according to some contributors, its been “hopefully this week” for quite some time now. It’s coming – but so is Christmas…
