Wellcome Trust sells stake in Wonga

August 3, 2013 12:28 pm 0 comments Views: 368

The Wellcome Trust, the UK’s largest medical research charity and one of the country’s biggest investors, has sold its stake in Wonga, the online payday lender, in the wake of the continuing storm over the company’s activities.


Wonga, one of the most high-profile short-term lenders, uses ageing puppets in its television advertisements

News of the sale of the investment – believed to be in the region of £7m – follows a series of negative comments from The Archbishop of Canterbury, the Most Rev Justin Welby, who said he wanted to put the company out of business by competing with it.

Although the decision to sell the shareholding was made a number of months ago, it was completed at the end of last week.

No new buyer was found for the shares, which are understood to have been cancelled by the company.

The news is a further blow for Wonga, coming as it does from one of the UK’s largest investors – the Wellcome Trust has a £14.5bn endowment – and so soon after the Archbishop’s comments.

The Archbishop made the comments after meeting with Errol Damelin, Wonga’s co-founder, saying that he hoped to establish a national network of credit unions to help end the need for businesses like Wonga.

However it later emerged that the Church of England is itself an investor in Wonga, through an investment in a fund raised by Accel Partners, one of the company’s leading backers.

The exact reason for the Wellcome Trust sale is not known, but it is thought in part to relate to questions over the ethics of its investment in the business.

Sir Mark Walport, the then director of the Wellcome Trust was forced to defend the investment in 2011 after Labour MP Stella Creasy questioned its investment in a payday loans company.

In a letter in response to Ms Creasy, Sir Mark wrote: “We have found the company to be extremely engaging and always willing to listen to feedback.”

He said although he shared her concerns about the payday loan industry, he felt it was “misleading” to compare Wonga with others who had a very different way of operating.

In addition to its apparent concerns over Wonga itself, the Wellcome Trust noted in its most recent annual report that it is focusing on concentrating its holdings, and selling down the smaller elements of its portfolio.

However it is highly unusual for a venture capital investor to sell out of its stake in a private company before an exit event such as a stock market float or a trade sale.

Although there are no current plans, it is thought likely Wonga will float its shares in either London or New York at some point in the future, at which points its initial investors will see their original investments significantly multiply in value.

In a statement, the Wellcome Trust confirmed the sale. “In December 2010, the Wellcome Trust purchased a stake in the digital finance company Wonga as a small part of our diverse portfolio.

“Several months ago, the Trust took the decision to sell this stake as it was no longer consistent with our investment criteria, and that sale is now complete.”

Wellcome Trust made its investment in Wonga as part of a £73m funding round, alongside investors including Meritech Capital Partners, Balderton Capital and Greylock partners.

At the time, Mr Damelin praised the investment: “Welcoming more respected investors on-board shows how much we have achieved in a relatively short space of time but, more importantly, it’s a sign of how much more we are going to achieve in the future.”

The Wellcome Trust was founded in 1936, funded by an endowment from US pharmaceutical businessman Sir Henry Wellcome, who pioneered medical research.

It has grown to be one of the most pre-eminent funders of such research globally, with a current focus on a number of areas including maximising the health benefits of genetics and understanding the brain.

The size of Wellcome Trust’s endowment allows it to have a varied investment portfolio.

In 2010, Wellcome Trust was linked to a bid for the Royal Bank of Scotland branches alongside Blackstone, the private equity investor.

However it eventually pulled out of the running for the business, which is again up for sale following the collapse of the initial sale to Santander.

According to its most recent annual report, some £6.49bn of its total endowment was invested in public equities at the end of September 2012.

£2.9bn of the endowment was invested in what it termed ‘growth & venture’ with £404.3m of that invested in what it termed ‘direct – knowledge’ which is where the Wonga investment is thought to have sat.

Wellcome Trust gives grants to a range of universities and companies to further its aims, with recipients in the year to September 2012 including the University of Oxford, King’s College, London, and GlaxoSmithKline.

The trust is run by a board of governors chaired by Sir Bill Castell, the former chief executive of one-time British pharmaceutical giant Amersham, and whose members include Permira founder Damon Buffini and Baroness Mannigham-Buller, the former director general of MI5.

Wonga declined to comment.

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