This investment opinion on the current Cytonn problems and investor woes was written and first published by financial analyst Ephraim Njega: When I think about Cytonn Investments and all the controversies which have been going on around them a lot of things come to my mind. Are these fallen angels who started with good intentions and were corrupted by money along the way? Is it true that their high yield product is a victim of coronavirus and not an outcome of fraud?

These are very deep questions. However, I have always had issues with Cytonn from day one to date. I have shared these concerns in the past. Here is how I can summarize the issues;

1). The way the founders of the company left their previous employers i.e. Britam has always been unsettling. They were accused of defrauding their employer. They have always denied the allegations but there was nothing decent or professional about their departure. The acrimonious exist was a big stain on the character of the founders

2). Excessive media hype – whenever you see a lot of positive media stories on a new company it should raise a red flag. There is always the possibility that these stories could be planted

3). Overselling and marketing hype – the way these guys were selling their products was almost like hawking. How do you hawk such a complex product?

4). Promise of consistent above market returns – the 18% promised was never supported by any legitimate business or investment. For someone to give you 18% how much are they making? We know the real estate sector in Kenya and there is no way it can afford such returns

5). Resisting regulation – the company has been at odds with the regulator. It wants regulations tailored to suit them and often claims that the regulations are there to frustrate them. It portrays any regulatory action by the regulator as malicious

6). Odd behaviour by the CEO – I find it odd that their CEO is always on social media responding to negative comments in the most unprofessional way you can think of. What is the need to be so defensive? Why does he think that anyone who questions the company’s affairs is driven by jealous and seeking their downfall?

7). Silencing dissent – the company always rushes to court against anyone who makes any comments or raises queries they don’t like. Again such defensiveness raises a lot of concerns. Most companies would ignore such or just issue a Press Release to clear the air

8). Disclosures – when I visit their Investor Relations page on their website I do not get the kind of disclosures I would expect. Apart from a few financial statements for the regulated products there is hardly much regarding the company’s finances. This is odd for a company dealing with so much money

Cytonn CEO Edwin Dande’s letter to Cytonn investors

9). Doing too much too fast – from the time the company was started it has been doing too many things and having too many products. This can be confusing to investors. Could this be deliberate? How is it that their regulated products manage just a few millions worth of assets while the unregulated products deal in billions worth of assets?

10). Weak defense – the best defense the company can offer is to clearly show all the cash they have received from the investors and exactly how and where the money was invested. Just using the pandemic as an excuse doesn’t wash. There is no better defense than showing us the money