Triodos customers who invested in the bank lose 30% after a year with the money blocked
Triodos is one of the main entities known under the name of ethical banking. It is based in the Netherlands and is owned by a foundation, SAAT. However, your clients can be 'shareholders'. They are not really shares, but participations that allow them to have economic rights, such as receiving dividends or benefiting from the good results of the entity, but without voting rights, except in some matters. This system has allowed the bank to finance itself and has worked since its foundation four decades ago. Until now. The system will change this year, having been shown during the pandemic to cause problems for investors. One of them has been the collapse of value for those who decided to invest in these titles.
These 'shares' are actually known as Depository Share Certificates (CDAs). Thousands of people in the different countries in which Triodos operates, also in Spain, and institutions have investments of this type. All of them have lost 30% of the value of their investment in the last year, after having spent all this time without being able to sell these shares. This has recently been recognized by the company, which has announced a repurchase program for these CDAs valued at 14.4 million euros for those who need to recover part of the invested capital. In January 2021, these CDAs were exchanged for 84 euros, and now it has announced that it is going to buy them back at 59 euros per title.
CDAs are not listed on an open market, as is the case on the Stock Exchange, but their price is set internally, based on different accounting aspects and the bank's performance over the year. That is, the law of supply and demand does not mark this price, but rather it is updated annually. It has been that way until the pandemic. In March 2020, with the arrival of the coronavirus and the uncertainty that arose due to the evolution of the economy in markets that were in quarantine, Triodos made the decision to close the exchange market for these securities. It reopened momentarily in October of that year but closed again at the beginning of January 2021. Since then, the market has been closed and customers cannot get their money back.
Triodos justified this return to closure in that the uncertainty surrounding the coronavirus crisis "had not disappeared" and confinements and restrictions continued to be observed. This had caused the bank to experience "a trading pattern in which the number of sell orders exceeds the number of buy orders." In other words, there were many more clients wanting to sell their shares than people willing to buy them. And this despite the fact that limitations on operations had been approved. "This comes regardless of the financial health of the bank" and "calls into question whether the balance will be restored," he said.
A client contacted by this means says that his mother has half of his savings in this vehicle and he has a part. He points out that, as a customer, the bank offers to allocate an investment to these CDAs. This affected party explains that, as it is an investment in an ethical bank, and from which few fluctuations are expected, a sign of confidence is given that it is a safe operation. The truth is that this investment has the highest level of risk (6 out of 6, on the scale that measures investment operations in the financial sector) and the bank acknowledges on its website that "it is a financial product that is not simple and can be hard to understand." The entity itself states in its documentation that it is an investment product and not a savings product, so it is not covered by the Deposit Guarantee Fund.
On March 29, a meeting of CDA owners is expected to approve a repurchase program, which is intended to provide liquidity to those customers who need to recover part of that money invested. Of course, assuming that you have an amount limitation per customer and that you will do so with a 30% discount. The bank, consulted by this means, explains that the new price set, of 59 euros, is due to an economic estimate "based on the illiquidity of the product due to the commercial suspension in progress, external expert advice, the precedents of other companies and our professional judgement".
The entity has reserved a part of those 14.4 million, about 3 million, for clients who certify a greater urgency to recover their money for issues such as paying the mortgage or for having become unemployed. General customers will only be able to recover 2,000 euros in this way and those who show a special urgency, up to 6,000 euros. This system, yes, will not be activated until April, so customers will still have their money blocked for other weeks. The bank, consulted about the possible legal actions that customers may take due to this loss of value, considers that "we have acted in accordance with our legal and fiduciary responsibilities." He acknowledges that this may conclude with legal measures, but points out that they will be "addressed at that time".
In any case, this repurchase system is a patch before the entity decides to definitively end this CDA system, after the problems observed during the pandemic. "After an exhaustive analysis, the executive committee concluded that the system of obtaining capital through the offer of CDA, used since the foundation of the bank more than 40 years ago, had reached its limits", explain sources from the Dutch entity. After the second suspension of the negotiation, and assuming that the balance between purchases and sales was not going to be obtained, the group began to look for alternatives.
Finally, a Multilateral Trading System (MTF) has been chosen. This system will be more similar to a Stock Exchange, open to investors, and those who have these titles will be able to buy and sell them, with variable prices, not like to date. However, this change is complex and the bank hopes to have the new share exchange ready in a period of "between 10 and 16 months", for which it has hired ABN Amro. Therefore, with this timetable, investors holding Triodos CDAs will not be able to recover all of their capital until next year. "We do not know what the response of the incumbents to this program will be, they have been informed promptly and we have also listened to them and asked for their opinion in international and local meetings, as well as with surveys and opinion groups carried out by specialized and independent consultants" , defends Triodos.
How this market works will determine what the real value of CDAs is and what the outcome is for clients who choose not to take a 30% loss now and wait for that new exchange model. "It will be the results, the expectations, the evolution of the market, the commitment to Triodos' mission and values, the level of supply and demand and many other factors that will determine the purchase price of the CDAs once the listing is effective", defends the entity.