This is what I've been saying. On the one hand, there's a bunch of chicken littles yelling about the end being near due to there being only "0.3 of a quarter left".
As I have said, the payments to merchants is their cash flow. Customers have it, customers they have deemed to be "people who will give it back".
If myIOU had 12 month terms I would bail. They offer 2, 3 and 6 months contracts. Again, please consider that IOU is using BNPL as a grabber to onboard people into digital banking.
They need to create a demand for the BNPL product and they need it to be *their* BNPL, for obvious reasons.
They took a risk by lending out most of their cash reserves, but that risk is based on their own internal judgement of their credit lending policies. The first 3 months lending = only 0.6% loss, which, with fees, equates to an approximate 108% return of the loaned funds.
It makes sense to me that they expect to get more than the 13 million they loaned out back within 6 months. They invested the cash. The money isn't spent on rubbish.
They haven't completed IDSB auditing yet and thus tranche 2 isn't going to trigger.
I see it like
1) we can pay a lower price for IDSB if we audit their accounts thoroughly.(and that would be.. a good business move..) 2) lets then go all in on BNPL as it's growing, people are paying, and we can grow our cash (a good business move...)
I agree that there has not been good communication on strategy, and can understand the disagreement with it, but it doesn't mean it's the wrong strategy. How can they communicate to shareholders that they would ultimately like to roll IDSB as hard as possible? They're two competing companies. It benefits IOU to pay less, it benefits IDSB for them to pay more.
IOU have already said in their shareholder communications that they have "prudently negotiated" a discount on IDSB if it can be proved they've been cooking the books. Imagine if they released a shareholder statement saying what I assume their strategy is, ie, we're going all in on BNPL since, we can, we'll get our money, and there's no way we're paying an extra 20 million for the rest of IDSB as we're pretty sure they're lying about their figures. That would be decidedly bad management.
And again, I ask all who are critical of this move - what should they have done with the cash? I have had no answer on this question.Should they have tried to limit BNPL lending to the same amount as the first 6 months? 5-6 million a quarter? 9 million?
What is a better use of cash - growing it or holding it? Saving it to trigger tranche 2 at full price? Why would that be a good move?
IOU Price at posting:
8.5¢ Sentiment: Hold Disclosure: Held
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