How do you get 12.5% on $200m? What you are suggesting is that...

How do you get 12.5% on $200m? What you are suggesting is that the current users of Parton are going to pay an extra 12.5% on top of what they are currently paying now? That doesn't seem realistic. Per the presentation, it would seem that they are expecting $15m revenue from 720,000 cases per annum (around $21/case on average across all fee sources). And the current gross profit margin wouldn't be too high based on the overall financials presented and the nature of the business.

How much value of wine is distributed by Parton already? They say they hold $200m worth. If that was turned over once per year that would indicate an average of $277/case. That seems too high. So they probably turn over more than that (you would be disappointed as a supplier if you were only turning over the inventory in the warehouse only once per year).

But even if it was $200m, then at $15m revenue that is only 6.6% of value that they are taking. Given the likely inventory turns, the real percentage will be less than 6.6%, probably more like 3-4% (at most).

So it would seem that DW8 are never going to get 12.5%. (DW8 makes $19/case across all fees, so quite similar and reasonable. Important to note that historically in the first half of this year that DW8 hasn't yet achieved scale and made no gross profit on its revenue.) This acquisition should get DW8 to scale so at least there is some gross margin being made - but it is likely to be quite low.

And even if you are right and they do get 12.5%... why do you that it would all be gross profit? They definitely won't be getting 12.5% on the marketplace. That is way above what anyone else charges for marketplaces (and there are definitely costs associated with it.)

There is good upside in the Parton acquisition, and the structure of the payment being entirely earn-out is a fantastic outcome for DW8.

Is it positive or negative overall? Most likely positive for the business generally.

What does it do for valuation? Probably technically makes it worse because it takes it further away from being a high growth tech business and skews much more to being a low margin logistics business. Business is still hugely overvalued in my opinion and needs to come down to be a buy.

Regards
Marv