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Hi @thewhitekiwi

I’m replying to your post in IOU Chart (https://hotcopper.com.au/posts/57414771/single) over here, so we don’t further hijack the chart thread with non-chart talk. Interesting comments, thanks for replying. I’m mainly just going to respond to this part:

At the very least it provides the company with good and solid independent income. For me it pretty much guarantees that they can’t go broke (as much as anything can), no matter what head winds BNPL faces. With an independent @$4M a year income, this can carry the rest of the company IF NEEDED a long way… For me it removes a lot of the investment downside risk, especially at the current stock price.

I should preface my comments by noting that I’m sure IOU know how to run their business far better than I do, so this is just my opinion, and the likelihood is my opinion is wrong. With that said, I really can't agree with the piece in italics above, particularly the first sentence. Just for a moment, try and think about it less strategically and more logically. If as you suggest, the ‘base case’ for buying IDSB is to guarantee financial stability, then they spent $41.0M to (potentially) access ~$4.1M in profit per year. Note that even this base case assumes two things: 1. That IDSB will continue to generate $4.1M of profit per year, year after year, and 2. That this will be paid 100% to IOUpay as a full dividend. Once you break it down in this simplistic way, you can see this is not a good use of funds. In light of increasing interest rates, if the base case was to generate cash to support the business, IOUpay would be better off leaving the $41.0M in an interest generating account. That would *definitely* guarantee them $4.1M of funds available each year for an entire decade, plus interest.

So now the question changes. OK, IDSB is clearly not just about spending cash to generate the same amount of cash. So what is it for? Well IOU have told us it’s mainly about accessing cross-sell/marketing opportunities with IDSB’s existing customer base. Yes there’s possibly plenty of merit in this, but as @SebbyV and others noted in the announcement thread, many of those opportunities could have been accessed via some sort of partnership or collaboration agreement, even if we had to pay some level of commission on each deal won as a result. Why was it necessary for IOU to part with 80% of their 30 June 21 cash balance in order to access these opportunities? This still has not been articulated by the Company to a satisfactory level to my liking. If I take off my investor-blinkers, there has been too much fluff provided about this investment, and not enough hard metrics. To be completely transparent: I am ever-so-slightly concerned that because the company had sat on a huge cash pile for so long, there was pressure to put it to work. This might sound absurd, but even Warren Buffet’s Berkshire gets into strife for sitting on piles of cash. It also complicated the business model: previously we were effectively an e-Payment company with three business divisions (Mobile Payments, Digital Transactions, and BNPL). The company focus was clearly on the latter. Now we also have a non-controlling interest in a long-term finance company that services Malaysian civil servants. At this point I personally cannot see the synergies. Whenever a company makes an acquisition of any sort, an investor must ask: why are they putting money aside to take over another company, rather than putting it back into their existing business? What is this saying to me about their own existing business? That doesn't mean all acquisitions are bad of course, but you still have to ask the question.

Again, I reiterate that I understand the IOUpay executives will know their own business model and future plans far better than I, a mere retail investor, can comprehend from afar. But as I said in my first post on the announcement thread (found here: https://hotcopper.com.au/posts/55957948/single) there is a balancing act between trusting management, and thinking critically for oneself. The fact the price ran so hard straight after this announcement was a clear sign to me that the market had misunderstood what the announcement was really about. I think of all posters, SebbyV was most on the money with the questions he raised. As I said in the aforementioned post, I think it is a 'wait and see' situation, but to protect capital I have reduced my position during this next 'wait' phase. I will look to build my position back up again if/when I can see the true benefit of the IDSB investment (verses the safety of a big cash pile), and when more certainty around the warehousing is released (per the company announcements, I expect the latter will be addressed this current quarter, as I noted in this post: https://hotcopper.com.au/posts/57197072/single). Any news flow about successful collaboration with IDSB's customer base will be great, but I'd caution people that patience may be needed. IOUpay promised 'mass onboarding' of iPay88 and Razer merchants months and months ago, and due to various delays we're still waiting for this. I'm sure it will happen, but patience is clearly a critical commodity with this stock. Hopefully if we get a mid-quarter update, some of this will be addressed.

Cheers,
m