Yes, the title is cheesy, but it’s a cheesy
NOTE: This is not investing advice, it was written for entertainment and thought provoking purposes only. Do your own research before investing in any company.
The catalysts for the following event were Monitise lowering guidance twice in one year, losses due to changing their business model to a subscription base over licensing model , and Visa announcing that they may relinquish their shares in the company.
Just in case you have been too obsessed with Alibaba (or as Doug Kass says, “Ali Blah Blah”) this past week to do any reading – I’ll give you a brief background. Visa announced that they may relinquish their 5.5% holding in the small UK mobile money company called Monitise … causing their stock chart to resemble a cliff…er ….vertical line .. going down, straight down, really, really fast, like a hot knife in a Baskin Robbins ice cream cake.
Welcome to Panic City!
Forbes says Visa says they want to work on their own technology to compete in the mobile $ space. Forbes says they may want to unlock funds to do so.
Really? Odd. Because they just made their funds worth a whole lot less.
What they don’t say and this stuff is worth knowing and remembering for the investors holding long – especially those in the house of pain right now.
1. Monitise doesn’t have to rush to develop anything. They have NFC and other patented solutions ready to go right NOW – and this IS happening right now! Yes, some banks have developed their own, or in the process of doing so, but many banks may find themselves playing catch-up soon and find they need a white label payment solution right now….and quickly, like yesterday, or the day before!
2. Monitise has partnered closely with IBM to work on apps and take advantage of IBM’s cloud services. Closely enough for Monitise to place 20% of their staff (200 employees) with IBM. IBM must want/need something from Monitise for this to happen as last time I checked, IBM was not a soup kitchen for wayward mobile tech companies. If it’s anything to do with Apple – we may never get the details. EVER. EVER. Did I say …EVER?
3. Apple has partnered with IBM and counting on them to develop more in depth software and apps that Apple wants to see happen as per Tim Cook’s recent interviews. By proxy that makes Monitise a little brother, ok, maybe more of a 2nd cousin twice removed, I mean – an indirect partner of Apple – but…see #4
4. Monitise can be successful whether or not they are involved with Apple Pay’s token payment system.******** Since they carry agnostic solutions, (meaning working on any handset with any bank, any credit card, etc…NOT agnostic – as in a non believer in God – as I read on an investment board recently) they have a bigger audience because they CAN work with any handset or any bank or any card, even a prepaid card, including – guess what? Yep, even Apple Pay itself. You have to remember that Apple isn’t the only game in town. When you look globally, Apple isn’t even the biggest game in many towns. How many Android phones out there? Yeah, Apple Pay won’t work for any of those. Being able to work with ANYONE is probably what Al Lukies means by 10% of a really big #.
5. Monitise could (read: should) be planning on being into retail with their shopping solutions as much as their banking and intertwining the two. Or why even buy Marcko Media? Why launch YAAP? For their contacts – yes – but so much more can be done there. Think Groupon. Think Target’s cartwheel app – oh yeah, that thing is dangerous! Anyone need some brocade red and gold drapes?
6. IBM’s partnership (Monitise by proxy) with Apple has basically made them competitors of ALL other developers or potential developers – including Visa. I mean, they already were – but when Apple Pay was announced, it just amplified it all… like a ringing phone in a cemetery at night.
7. Visa once owned 14.4% of Monitise and now only owns 5.5% – this too shall pass. I saw many investors flat out trashing Visa on Twitter. Don’t judge Visa too harshly – they will be fighting for their life too, in this changing landscape. Oh, you don’t think so? Think about it.
McDonald’s vs. Chipotle – right now!
Remember Tower Records? Blockbuster? Anyone?
8. While mobile payments will be an all out war for a while – with many smaller battles taking place around the world – there can’t be one winner – just as there isn’t one credit card company, one bank, one restaurant chain, or one retail store. Monitise may be small, but they had a head start in the mobile payment arena. Especially when it comes to linking banks and money to mobile handsets. For those that are still not sure this is going to happen, ask yourself one question. Have you ever see a millennial without a phone in their hand (or the very least, their pocket or bag) … EVER?
9. Monitise has put revenue expectations in place for the Marcko Media purchase price and share price expectations for their own directors to get their share bonuses – all available in the RNS section on the Monitise website. Right now, not so relevant – but it may help you hold your nerve, and get some sleep.
10. Does the Investor Relations division need to do a better job? Yes. Problem is, Monitise may be a little too busy in this battle to hold the hands of their investors. They are still a little company walking alongside Titans. So, you may just need to wring your own hands for a while, vent (nicely please) on Twitter, tend to your garden, do some research, or write a silly blog post. The people at Monitise are a little busy doing what we investors expect them to do and are adding paths to those subscriptions. Like these…
More thoughts on the future of Monitise.
The article quotes Barclays as stating that the market clearly over reacted to the stock overhang and loss of future revenue tied to Visa. They also state the loss of Visa as a client as about £10mil in revenue in 2017. By then Canaccord Genuity estimates generating annual revenue of £372 million and adjusted pre-tax profit of £64.3 million for Monitise. (In other words, they don’t need Visa)
According to a fellow tweeter Alessandro Grande:
@alegrandebig: @MzJunieBug basically 10x eps 2017. For tsla you pay what 30x 2020.
There are companies out there that have sky-high stock prices that have never shown a profit…Hello Amazon? Or cult stocks that are extremely expensive…Hello Tesla? And the beat goes on. And some people want to pick on Monitise?
My answer: Oh…go pick on someone your own size!
Note: Monitise is a stock trading OTC and is a high risk stock. Several large US investors own shares of Monitise, but this makes it no less risky.
BTIG also thinks the market over reacted and that it’s a good time to BUY. They also think a takeover by IBM is increasingly likely.
To be honest, I really want this to play out all the way, without a buyout
******The reason I did not bring up the payment token and NFC patents that Monitise holds: Apple has their own token payment patent from 2009 – (as well as an NFC patent) so not sure if they really need anyone else to make the token part of their payments work. Keep in mind, that many companies hold token payment or NFC patents now, all of them different enough to be granted.
That being said, the patents that Monitise holds are still very important as it protects their own work product and allows them greater access to a wider variety of clients as they can offer a greater range of services and products.
Author is long MONIF, MONI.L, and AAPL
And maybe IBM soon (she said with her tongue firmly planted in cheek)
How I originally invested in this small UK company.