Xinja investors told shares worth ‘close to, or actually, zero’

Shareholders in fallen neobank Xinja are bracing for the company to be placed into liquidation after a memo sent on New Years Eve warned their shares could be worthless.

In an update sent to investors after 4pm on December 31, Xinja said it had enlisted an external party to explore options to recoup value after the company made the shock decision to exit banking only 15 months after receiving its licence. "This is without doubt the toughest letter that any member of the board has had to write in our professional career," the email, obtained by The Age and Sydney Morning Herald, said.

Xinja CEO Eric Wilson and board director Thomas Vikstrom.Credit:Dominic Lorrimer

"At this stage we do not know what the exact remaining capital at hand will be once the banking licence handback is completed. This will depend on many factors outside of our control."

Customers were separately told on Monday that Xinja's mobile app would be discontinued this week and they should move to withdraw any funds remaining in their accounts.

Xinja surprised shareholders and customers when it announced in mid-December it would close all bank accounts and terminate its banking license. The neobank had promised to shake-up the banking industry and blamed COVID-19 and a tough capital raising environment for the decision.

However, The Age and Herald revealed the bank had pinned all hopes on a $433 million lifeline payment that ultimately never came through.

The New Year's Eve email said Xinja staff had been made redundant and the return of deposits was on track but directors struggled to provide clear answers to frequently asked questions such as, "Will Xinja continue as a non-bank?" and "Will Xinja shares be worth anything?"

Xinja said it had not been successful in "securing a pathway" to launch its US share trading platform, Dabble, adding the size of remaining capital and ability to expand into other services would determine its ability to stay afloat.

"If the business is able to do those things, then it may be possible to retain some value and slowly rebuild the business outside of banking. Otherwise, the likely value of our shares will be close to, or actually, zero."

"They're done"

Retail shareholder Brett Caldwell noted the letter had not been signed by chief executive Eric Wilson, as was the norm, adding he had "come to the conclusion, they're done".

"I think they're just talking about Dabble to drag it out and use it as an excuse to burn whatever money they have left," Mr Caldwell said.

Another shareholder, Will Rosewarne, said he was now treating his early investment in the start-up as a sunk cost. "I don't see any way in which anybody would see value in Xinja. I'd give it a few months before it's wrapped up, in liquidation and they're selling it for whatever assets they have left."

Others were less pessimistic, with shareholder Kai Ansaari remaining hopeful Xinja could reinvent itself. "Maybe it’ll be a case of under promise and over deliver … I think something will emerge out of the dust of Xinja."

Xinja's latest filings with the prudential regulator showed it had around $25 million in top tier capital as of September 2019 but a spokesman declined to comment on how much of this remained. The spokesman said Mr Wilson remained as Xinja chief executive and declined to specify the number of staff made redundant or which third party firms were helping with the restructure.

"Xinja is working with well known accounting and legal firms to assist it," he said, also declining to comment on the likelihood the company would go under. "The board is monitoring this closely and will continue to act in line with their obligations and duties."

Shareholders were also furious about the lack of communication coming from the company. An online forum used by Xinja shareholders and customers was deleted after the neobank announced bank accounts would be closed last month and Mr Caldwell said this had stifled the flow of information.

"Since the community was shut down, there's no two-way communication. It's just the updates we get every now and then," Mr Caldwell said.

Another shareholder who invested $20,000 in the company, Sergei Sergienko, agreed saying there was "definitely not" enough information coming from Xinja.

"Put it this way, if I had my nest egg in them, I would start to be getting worried. The lack of communication is very bad. It's unfair to the shareholders."

'App closing tomorrow'

Xinja customers with remaining funds in their account were told via email at 7.20pm on Monday night this week the mobile app would be discontinued within just over 24 hours.

Customers that failed to recoup funds would have the money transferred to another bank on their behalf, the email said.

"Once the app is closed, the process for both obtaining the remaining balance or accessing statements will be more difficult," the email said.

Customer Bob Pratt who has a "fair bit of dough" with the bank said he had struggled to download bank statements from the app as it kept glitching and crashing. When he called Xinja on Monday for assistance, he was told the app would close by the end of the month.

"The CEO has gone to ground and now he’s hand-balling everything to his minions. It’s a bit of a bugger," Mr Pratt said.

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