It’s time to receive your shares

In September 2020 Chip ran the biggest crowdfund in Europe. Unlike our previous crowdfunds, this round was a “convertible” rather than a direct equity round. This was due to the participation of the Future Fund and British Business Bank, who operated on convertible terms and matched the funding.

The board have taken the decision to convert the round. This means you will get your shares (at the discounted price) and any interest owed. Please see below for answers to most questions. You can ask us directly on ourforum: https://community.getchip.uk/ or dedicated Investor Facebook group.

Crowdcube will be helping us for this process and will send more information later in the week.

Why are we converting the CLN to shares?

When Chip raised investment in September 2020 it included a £5 million participation from the Future Fund. The terms offered by the Future Fund were a Convertible Loan Note (CLN), and so instead of issuing shares to investors immediately, investments would be converted to shares at a later date. You can read more about CLN’s here.

Chip is now converting the CLN and issuing all CLN holders with shares.

Why now?

Chip had planned to convert the CLN to shares at our follow-up investment round. However, the board of directors and lead investors have decided to convert the CLN prior to the follow-up investment round for two reasons. Firstly, as Chip continues to introduce new products and services that require FCA authorisations, there is a need for the business to have sufficient Tier 1 regulatory capital (you can read more about Regulatory Capital here). Sufficient regulatory capital gives the FCA confidence that the business can continue to act in the best interests of its customers. The CLN is not considered regulatory capital and so converting the CLN now to shares provides Chip with necessary regulatory capital.

Secondly, as Chip pursues the follow-up investment round, it is the board's opinion that converting now is beneficial to this process.

How will this work?

Crowdcube will be running the process on our behalf. You will shortly receive an email asking for a vote. Once investors have had a chance to vote, we will formalise the process later in the week. We feel a vote allows us to engage as many investors as possible.

What would happen if Chip doesn’t carry out the vote?

Crowdcube Capital Ltd. is the nominee for the CLN holders and has the final say on such matters. That said, in line with our community values, we would like to survey the individual CLN holders and get their approval.

What happens if I vote no?

We expect it is very unlikely that CLN holders will not approve the issue of their shares. If for some reason the majority of CLN investors did not approve, the board of directors would make their best efforts to engage the community and find a workable way forward.

What will the share price be?

The share price for shares issued by converting the CLN is expected to be £1.12. The precise share price will only be known on the conversion date.

The expected business value for the triggering the conversion is £67,860,000. CLN holders will receive their shares at 20% plus an 8% p.a. discount to that price.

Had Chip planned to convert this early when they did the round in May?

Chip had planned to convert the loan at the follow-up investment round. Instead, the CLN is being converted earlier for the reasons explained above.

What impact does this have on the value of my shares?

This grants you your shares at a 20% + 8% p.a discount to the trigger price of £67,860,000.

Are there any disadvantages to the investors that may result from the changes proposed?

It is the view of the board of directors that this is in the best interest of all Chip shareholders and does not cause detriment to any particular group of shareholders.

Will I still get 8% interest on the loan?

Yes, you will have earned 8% p.a. from the 29th September 2020 to the agreed date of conversion (provisionally 1st February 2021). The accrued interest will be added to your share discount. For example if the CLN converts on 1st February your shares will be issued at a 22.7% discount to the trigger price. (20% + 8% p.a. pro rata for 4 months).

Can I receive my 8% interest in cash?

The 8% interest will be available in cash for those investors who invested more than £1,000 in the CLN. Given the relatively small amounts, we recommend investors take the interest accrued as additional shares. Those not wishing to do so, should head to this landing page, and request the interest in cash. We will then get back to you.

Can I have EIS on the shares?

No, EIS was not available on this investment.

For more questions please head over to the forum: https://community.getchip.uk/ or the dedicated Investor Facebook group.