Coronavirus update

Hello,
In view of the recent global events it would be nice to know how Wisealpha sees the situation and what it is doing to protect investors, as well as if you have any advice, you see any risks, etc. Anything to reassure investors their money is safe with you guys…
It would be nice if Wisealpha issues an official statement how it will handle the situation.

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Hi @idimitro,

Thanks for your message.

This is a challenging time for everyone. The world is currently going through a situation never experienced before in modern times due to the COVID-19 pandemic. Financial markets are experiencing extreme volatility as COVID-19 spreads and this volatility will continue until this is reduced and there is a clear timeline for vaccine production.

It is a situation that will be resolved but it is a question of when and what we can do in the meantime to mitigate the effects.

Our top priority is the well-being of our staff, their families and our customer and investor community. I want to reassure you of that. The more we can limit the spread of this virus the better and the sooner normal life will resume.

At WiseAlpha we have been preparing for this scenario from January and monitoring events in China as a template for what would happen in the West and ensuring this will not significantly disrupt major plans and launches that are upcoming. We have been implementing measures to ensure customers get the uninterrupted services they need and maintaining a strong level of customer service.

I can assure you that we are currently monitoring and assessing everything that is going on to position WiseAlpha strongly during and out of the crisis.

Here is our how we are protecting each of our stakeholder groups:

Staff measures

We have gradually been shifting staff to work from home shifts with team interaction by video link throughout the day and now all staff members are encouraged to work from home where possible. Our staff are encouraged to follow all government guidance (as well as our own) with regular temperature checks, increased personal hygiene and contingency planning if they become ill.

Our Fintechwise (part of the Master Investor conference) has been rescheduled to December to protect staff, business partners and the general public.

Shareholders

During the course of 2019 we invested heavily in our systems and staff and there are some major announcements we will be releasing in due course (on hold given the current environment) that will provide a strong growth path for the company despite the weaker economic outlook.

Our app testing, volume partnership implementation and product listing preparation that we mentioned to you in our January shareholder update will continue unaffected although the release schedule may be pushed back a little given the situation.

We actually expect the current economic environment to create more favourable competitive conditions for WiseAlpha and accelerate the shift away from other types of investment platforms later in the year.

WiseAlpha has ample capital to see us through the current Covid-19 situation and beyond and in addition our largest investors are supportive of investing further to help us grow our team ahead of major releases, despite the current economic environment. And obviously continued support and further investment from our wider shareholder group in the future is welcomed.

Since senior management are all large investors in the company our goals are aligned with all of our shareholders and we are fully focused on protecting and creating shareholder value no matter the environment.

Platform investors

WiseAlpha has always had a strong operational set up but over the course of 2019 we have taken further steps to strengthen WiseAlpha’s corporate governance, systems and back-up continuity plans and this reassures us as we navigate through the COVID-19 situation. We are well prepared to maintain our services in adverse circumstances and continue to operate as normal.

As a reminder all of customer investments (Fractional Bonds) are segregated from the day to day company operations in an orphan trust vehicle administered by the 4th largest investor services firm in the world, IQEQ and all assets are held in custody with BNY Mellon. We have an independent board of directors that oversees everything in addition. All uninvested client money currently sits in Lloyds Bank in a designated client money account that is protected by the FSCS.

Taking a look at the corporate bond markets we expect COVID-19 to impact some industries much harder than others. For example Travel, Leisure, Autos, Hospitality and Non-food retail will be affected more greatly than Telecoms, Infrastructure, Asset backed or Technology companies. Banks and financials are also well capitalised at the present time. Market leaders will generally have more options than smaller companies. In some of the weaker industries some companies will need to restructure without government support or a quick resolution to the pandemic. While we do expect the government to provide continued fiscal support this can’t protect all companies. Cash and liquidity are the sole focus for companies right now. We expect smaller companies and P2P type lenders to be hit dramatically.

Companies respond to economic shocks in different ways and bonds, like equities, go up and down with price albeit bonds are different from equities in three key ways:

Bonds have to be repaid by maturity, so the amount of money you are owed does not change as the bonds’ prices fluctuate.
Bonds rank ahead of equities, so bond holders must be repaid ahead of stock-market investors.
Senior Secured bonds have first right to assets over unsecured creditors in the event of a liquidation.

When all is said and done we expect equities to fall harder than corporate bonds.

There will of course be numerous unprecedented buying opportunities in both bonds and equities over the coming months as panicked sellers and fund liquidations occur but as Buffet says when others are fearful, it may present a good value buying opportunity.

WiseAlpha expects to resume new additions to the market (which reduced since Jan) as we see value opportunities emerge and are determining interesting entry levels.

From all of us here at WiseAlpha, please stay safe, vigilant and keep looking out for one another.

Regards,

Rezaah

CEO WiseAlpha

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Thanks for giving us a detailed reply.

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Thanks for the reply Rezaah. Stay safe!

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Thanks for your reply!

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Thanks Rezaah - very usefull and clear…
Hope you guys are all ok…
Phil

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Rezaah,
What happens to bonds if the company goes bankrupt before the C19 vaccine is found?
Example Travelodge etc might not be able to exist on 50% occupancy.
I guess even secured bonds lose out.

Hi John,

While there is no certainty on when a vaccine is ready it is likely to be a lot quicker than historically given all the concerted effort. Maybe not as quick as in the film Pandemic but certainly quicker than what Anthony Fauci used to think.

At the moment economies and businesses are opening up and so a return to a level of activity by businesses will help generate some cashflow until as such time things eventually return to normal, which could be a while. Different industries and businesses are coping with things in different ways. Some businesses are doing well, some are resilient and then the discretionary travel, retail and leisure businesses are suffering the most. While secured bondholders are higher up in the capital structure and have the first right to any liquidation proceeds in an administration or bankruptcy if a company just has collapses because it has no cashflow and its assets are limited then even secured bondholders can take a big hit. Its worth checking the assets each company has and the updates management give on how they are coping with the pandemic. In Travelodge’s case they have furloughed most of their staff and are negotiating with landlords to defer rent payments out as well as going through a CVA which can help reduce rents (the biggest cost) and loss-making hotel sites so they can cope with reduced occupancy. They had a decent amount of cash to begin with but will run through that and so shareholders are pumping in an additional sum once their is an agreement on rents. The view from buyers of the debt at the moment seems to be that there is a good prospect the company will be able to adjust its costbase and manage liquidity to get through the next 2 years until occupancy rises again but obviously there are also some sceptics which is why the bonds trade at 81. That’s why for companies who are shutdown or will have a slow recovery after the re-opening it is important to assess whether they have the where-with-all to stand a lean couple of years until the good times return. If you are faint of heart as an investor and don’t like volatility its best to focus investment on the more stable sectors like Food, Telecoms, Cable, Utilities, Property-backed, Financials, Insurers, Tech, Recurring subscription businesses or investment grade (higher than BBB rated) companies that while may not offer double digit returns can generate you a good return considering the lower risk.

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Thank you Rezaah,
Most of the BBB rated companies do not issue secured bonds or their interest rates are very low.
Regards
John