I was scratching my head as to why there was a fund manager 'Spheria' who thought A2B was a good investment. What was their reasoning...
After a little digging I found their explanation...
" A2B Ltd (A2B.ASX) –formerly Cabcharge – fell 11% over the month on the possibility of some slight reductions in their Victoria cardtransaction commission rates. It is possible these reductions are adopted by other States placing more financialpressure on taxi drivers and favouring ride share companies that are losing money with no obvious path toprofitability. The low interestronment is rewarding risk taking and stoking asset bubbles across differentsectors of the economy including ride sharing. We expect the class action brought on by taxi licence holdersagainst Uber to be a watershed case for the industry and potentially hugely value adding for A2B given it was thelargest licence owner in Australia when Uber seemingly operated outside the law."
So what Matthew Booker at this fund is basically saying is, they are taking a punt that a class action will put a bomb under Uber... What about Didi, and Ola or any other entrant ready to pounce in the market on the HUGE if that Uber would be pushed out of the market. What a pipe dream!
Uber is flush with cash and even in a case win, they would not go. Just a tiny speedbump for them and no macro change to the companies long term prospects. Good for the drivers of course getting compo, but you can't by shares in the driver and benefit from that.
Lets say they left..
Uber customer: "Ohh no, Ubers gone... Better download Ola... Done!"
Where is the macro investment case?
What about the government trend to cut commissions that A2B can charge? That says to me they are fine with ride share and there is no company being kicked out of this country to give A2B their dwindling market share back. He says 'slight reductions' how about 50%! Slight? Hmmm...
Just madness IMO and I think they are looking at a 'valuation' case for A2B and not taking a helicopter view of the situation here.
A2B Price at posting:
$1.42 Sentiment: Sell Disclosure: Held
