Splitit to kick off 2019 IPO season
The Israeli fintech start-up Splitit offers pretty much the same vale proposition as Afterpay but is currently in the early stages of developing its presence in the USA, Europe and Asia Pacific.
Splitit is an Israel based technology company providing payment solutions to business and retailers. The Splitit Payments Platform integrates into a merchant’s payments system, offering flexible payment options to customers.
The company’s main source of funds are derived from transaction fees, paid by the merchant whenever an end-customer utilises the Splitit payment option online or in the physical store. As such, the total value of transactions and number of customers using the platform are the primary revenue drivers.
Merchant fees have grown by over 200% year on year during Q3 2018 to approximately $350k with just under $1 million in collections during that period.
The IPO may seem familiar to Australian investors who have followed the success of Afterpay Touch (APT). Afterpay’s payments technology allows consumers purchase goods and services now and pay in the future of over four scheduled instalments. APTs share price rose over 100 per cent in 2018 with the company currently adding 7,500 new customers per day to its platform.
The Israeli fintech start-up Splitit offers pretty much the same vale proposition but is currently in the early stages of developing its presence in the USA, Europe and Asia Pacific. Failure to establish a presence and grow transaction volumes is a key risk. However, a strong inside ownership from key executives could give the market confidence in management’s ability to grow revenues and ultimately deliver shareholder value.
The consumer financing industry has low barriers to entry and the competitive landscape is high. American payments behemoth Paypal, Australia’s Afterpay and many start-ups are disrupting the market, but only few will succeed.
With an indicative market capitalisation of up to $54 million, Splitit is required to deliver significant growth to maintain its valuation. Many technology and software IPOs have disappointed ASX investors in 2018 and investors of this IPO are also required to have a speculative appetite. Whilst inital excitement could trigger a share price rally, the long-term value of this company has yet to be proven.
Splitit Payments Limited
ASX Code: SPT
Shares on Offer: 60m
Listing Price: $0.20
Market Capitalisation: $54m
Listing Date: 7th February
Author: Simon Herrmann
Jan 29, 2019
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.