The big shock for small-cap investors this week was the departure of the chief executive of Monitise (LSE: MONI), Elizabeth Buse. Well, it was a shock for those who had failed to see the writing that’s been on the wall for quite some time, but it certainly didn’t surprise all of us.
Founder and co-chief Alastair Lukies had previously left, and Ms Buse’s departure was said to be “due to her desire for personal reasons to return to the United States“… Prior to her stint at Monitise, Ms Buse had been Executive Vice President of Global Solutions at Visa Inc., and therein lines the true tale.
Monitise had been a rising star among growth investors, especially with Visa as an early shareholder — if Visa was going to use Monitise’s mobile payment system, its future was surely assured. And the share price duly soared, as high as 80p in February 2014.
Then it all went bad…
But the company hasn’t been able to find a way to make a profit yet, and shareholders had an unpleasant surprise in September 2014 when Monitise announced that Visa was “undertaking […] an assessment of [its] investment stake” in the company. From that date, hastened by warnings that losses would be worse than expected, the share price plunged as far as 5.8p by 8 September 2015.
Then the next day, things got even worse, when Monitise reported a 6% fall in revenue for the year to £89.7m, with an adjusted loss after tax of £55.3m — and told us of Ms Buse’s impending departure. The share price duly collapsed further, and stands today at a pitiful 2.6p — 97% down from its peak.
Ms Buse is reported by the Financial Times to have said she believes “…that the changes we have made to our balance sheet reflects much more strongly the business we will be than the business we were“. She reckoned that business-to-be will be a stronger one, but I’m afraid the only kind of business I can see Monitise becoming is an ex-business.
That, to me, has been inevitable since the day Visa decided to pull the plug and walk away — and I’d wager that Ms Buse’s homeland must have started tugging at her heartstrings at around the same time.
Monitise enjoys no real barriers to entry in the payments business, as it just doesn’t have enough big companies committed to its system in a way that would make it too expensive or too damaging for them to move elsewhere. It’s a market that the big players with massive financial clout can walk into and take over before your hat can touch the floor — and we can see that with Apple‘s Apple Pay, which is making big inroads into the US market and is set for an attempt at something similar here.
It’s too late
No, what Monitise needed to do was get a big financial partner on board, and then have that partner adopt its payment system for all its mobile transactions and perhaps even buy out the company for a fat return to shareholders. For me, that chance has been blown.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise and Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.