Hi @Getx and @Zingy. I’m bemused that I keep getting asked why I follow IOU. Step back and think about the last 18 months – this has to be one of the craziest ASX tech microcap stories I’ve witnessed:
A tiny, relatively unpopular fintech operating in Malaysia for two decades unseats its old board, rebrands and pivots towards BNPL, becoming an internet meme stock in a few short months. This is July to October 2020 onwards, so Covid is a known issue already. They raise $50,000,000 (!) pretty much at the top of the BNPL market, and release a roadmap with grand ambitions to become a South East Asian powerhouse in all things from BNPL to prepaid inventories and digital payments, backed by their 20-year experience and longstanding relationship with big local banks/businesses etc. The business case sounds brilliant, and I love it. Then Malaysia goes into stages of lockdown, and while other tech/BNPL companies around the region/world continue expanding, IOU bunker down and instead commit 80% of their cash reserves towards purchasing a non-controlling stake in a private Malaysian lending business no one has heard of before. The overseas expansion plans are abandoned, Covid is blamed, the business doesn’t manage to secure external funding but they continue aggressively marketing and hiring staff and signing new merchants. Despite all the noise about being a first-mover in the market, almost every merchant network deal signed goes through some major delay: the key iPay88 deal still isn’t effected 14 months after it was originally announced. The TTV numbers are underwhelming, about A$5M per quarter, but that makes sense because unlike all other BNPL's they are limited to a single developing economy. Yuma the much-lauded "face of IOU" is quietly dumped. The app is getting pretty bad reviews so a new version is released to great fanfare. Then in March 2022 IOU announce they did $9.4M TTV in just six weeks, but in April they reveal they only did $1.6M in the following six weeks. They've had to rapidly slow down their BNPL as their cash reserves are so low, they still don't have wholesale funding, and they will be releasing a new roadmap (IMO: they are preparing for a capital raise). Eight months after announcing IDSB they only own 21%, and are still drafting up their cross-sell plans (which was the key reason they gave for buying in). Meanwhile... the market capitalization has collapsed to the point the entire company is worth less than than the $50M cash they raised last year.
And you wonder why I’m still following/commenting on this thing? Look, no one knows the future - they might actually pull a total rabbit out of the hat and end up overtaking Hoolah, Atome, Boost, Pine Labs, Kredivo, Rely etc. But it's a fascinating case study and one I can't help but be interested in.
IOU Price at posting:
8.4¢ Sentiment: None Disclosure: Not Held
(20min delay)