2015 is shaping up to be a year Monitise‘s (LSE: MONI) shareholders would rather forget.
Over the past six months, the company’s shares have declined by a staggering 81%… and over the last 12 months, Monitise’s shares have slumped by 89%.
These declines are enough to test even the most experienced investor. Unfortunately, during the past seven days the sell-off has only intensified.
It’s not 100% clear why the sell-off of Monitise has intensified in recent days. However, July has been an extremely testing month for the company’s shareholders.
During the past 30 days Monitise has issued yet another profit warning, and Visa Europe, a long time supporter of the company, has announced that it is planning to sell its stake. Moreover, hedge fund Omega Advisors has been aggressively selling its Monitise stake this month, and Apple Pay has been rolled out across the UK.
Still, it’s difficult to pin the declines on just one factor.
Selling by Omega Advisors, a majority shareholder, could be blamed. The fund sold around 35 million shares between 7 July and 22 July, but no trades have since been reported. Monitise’s shares have lost around a third of their value since Omega stopped selling.
The value of disclosed short positions doesn’t offer any clues, either. According to figures, the value of Monitise’s shares out on loan to short sellers stands at one of its lowest levels in 12 months.
And as there’s not much concrete evidence to establish why Monitise’s shares are declining, it could be the case that investors have just lost patience with the company after the deluge of bad news.
Time to sell
So, is it time to join the crowd and sell Monitise?
Well, the recent declines are troubling but there’s no substantial evidence from which to draw a conclusion. The company is working hard to turn things around and still has several lucrative partnerships with Santander as well as IBM. As I’ve covered before, these two partnerships could be valuable for Monitise. Also, there’s a chance that Santander could make an offer for the company.
Santander announced at the beginning of this month that it was committing £10m to a 50:50 financial technology joint-venture with Monitise. The deal will see Monitise will benefit from a multi-million pound upfront licence fee, with further ongoing revenues expected to be generated by the initiative. This is in addition to the company’s 50% share of the business and opportunity to work with one of the Eurozone’s largest banks.
What’s more, Monitise has a strong, cash-rich balance sheet, although it’s unclear how quickly the company will use up its existing cash reserves.
Nevertheless, for the time being Monitise remains a work in progress, and the next few trading updates will be key. Overall, while recent declines are concerning, it’s not time to panic. Monitise still has cash, customers and continues to work with some of the world’s largest companies.
Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.