Should Investors In Monitise PLC Now Abandon All Hope?

For some investors, respected chief executive Elizabeth Buse was the last good reason to stand by troubled mobile payment stock Monitise (LSE: MONI). Now she is off, to be replaced by deputy chief executive and chief commercial officer Lee Cameron at the end of October. She may be leaving for personal reasons, but, after barely six months in the job, this is yet another sign that Monitise is out of luck. 

Market Buse

It was former Visa executive Ms Buse who directed the company’s shift away from upfront software licensing to a subscription cloud-based mobile money platform, a strategy that hasn’t paid off yet. Yesterday, Monetise reported a worse-than-expected pre-tax loss of £227.4m against “just” a £63.4m loss in the previous year. Year-on-year revenues slid 6% to £95.1m and seem unlikely to grow this financial year. The company’s share price plunged more than 50% on the news. Over 12 months, it is down 93%.

The days when investors dreamed that this would be a multi-bagging growth machine are a world away. Right now, survival is the priority.

Mobile Money

Monitise once raised hopes by stealing an early march in a boom market. In the US, mobile payment volumes are expected to climb from $37bn this year to $808bn by 2019, according to BI Intelligence. The UK is likely to follow a similar trajectory. The question now is whether Monitise will also climb, or fall by the wayside. With the share price at a six-year low, markets suspect they know the answer. 

The rapid growth of mobile payments has turned out to be more of a blessing and a curse. Monitise has found itself overshadowed by global behemoths such as AppleGoogle and Samsung whose pockets seem bottomless in comparison to Monitise’s threadbare linings. It is down to its last £88.2m.

Burn Baby Burn

Monitise also appears to have made mistakes, reportedly souring relations with investor Visa by also launching a tie-up with rival MasterCard. The company’s share price took a hit when Visa cut its stake in July. US hedge fund Omega Advisors has also been rushing towards the exits.

I had hopes that Monitise would become that rare breed, a British technology powerhouse, but maybe we have to accept that we just can’t compete at this level. Hope springs eternal and some analysts are still looking at the bright side, noting that its market cap of £61m is worth less than its remaining £88m cash pile. Just remember, that cash pile is rapidly running down — it was worth £146m just one year ago, although the burn rate is expected to slow.

Off The Money

Time and money are against new boss Cameron as he tries to tempt new customers into the cloud. Just two have signed up so far and neither has rolled out the technology. This doesn’t look good. Future customers may be put off by the company’s deepening plight. So, it seems, have potential takeover bidders.

Buse isn’t the first Monitise casualty. Founder and co-chief executive Alastair Lukes left following a strategic review last year. Hopeful contrarians who decide that now is a good time to buy must accept the danger that they may become a casualty as well.

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Harvey Jones 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.