Neil Woodford Fund Extends £10 Million Lifeline to Struggling Digital Bank Atom

Fund manager Neil Woodford’s recent travails may have stemmed from the amount of unlisted in illiquid technology and biotech stocks his funds are invested in but it hasn’t stopped him extending another £10 million to Atom, an online only bank they are a major investor in. Atom, promoted by music and television star will.i.am, has been propped up by a total recapitalisation of £50 million – all of which has come from existing investors like Woodford’s Patient Capital Trust.

The trust invests specifically in start-ups but it had been recently speculated that Woodford was exploring the option of selling his stake in Atom. The other investors contributing to the £50 million injection are BBVA, the Spanish banking group, Toscafund and venture capitalist Jon Moulton’s family fund Perscitus. The latest £50 million investment takes Atom’s to £450 million.

Despite the significant investment it has attracted from major backers, Atom has struggled to gain the level of traction it had hoped to. The digital banking marketplace has become competitive with other British fintechs such as Revolut, Monzo, Starling Bank and TransferWise all fighting for their share of the pie. Atom’s competitive advantage over other online only banks is that it is already a mortgage lender. But huge competition in the mortgage market has slowed growth in Atom’s lending levels considerably. The bank has deposits of £1.8bn and loans of £2.4bn, and posted a loss of £53m for its 2017-18 financial year.

Neil Woodford’s Patient Capital Trust holds an 18% stake in Atom, which was founded by Anthony Thomson, the founder and CEO of Metro Bank, which has also had its own troubles recently. BBVA is the biggest shareholder with 39% of the bank though declined to take up an April option to acquire the rest of the company’s shares. Toscafund and Perscitus hold 29.7% and 2.4% respectively. Atom is said to be planning an IPO for 2022.

Neil Woodford’s high number of investments in mainly loss-making privately-owned technology companies was heavily criticised after he was last month forced to suspend withdrawals from his Equity Income Fund. Billions had been taken out by investors who had run out of patience with the fund’s long term, high risk investment strategy. Because shares in privately owned companies are illiquid, the fund ran out of free cash to pay investors who wanted to take their money out.