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Tyro Payments targets retail investors; Potentia keeps working on bid

It’s blue sky retail shareholders vs institutional punters in the battle for Tyro Payments.

Tyro’s board, still waiting on a firm bid from Potentia Capital’s consortium, is stuck between the two shareholder groups’ very different views of the company and its outlook, and will have to bring them together if the situation is to turn into a near $1 billion takeover.

Tyro Payments handled $21.7 billion of transactions through its terminals in coffee shops and other venues in the six months to December 31. Glenn Hunt

The institutions, reading the tea leaves in the economy and with hundreds (literally) of other stocks to invest in, want to see Tyro’s board take Potentia & Co’s cash, provided the bid’s a little up on the previously advised $1.60 a share mark. They know Tyro’s bank business is yet to make money, and consider the bank a cost centre that’ll require subsidising in the medium term, at least.

Retail shareholders, though, seem to have a more rosy outlook and like the look of new Tyro MD Jon Davey’s “rejuvenation” plan and its record EBITDA in the six months just gone, and are thinking the stock could be worth $2-plus.

It is understood Tyro’s met with investors in both camps in recent weeks, and will front the wider retail investor base on Thursday. Chair Fiona Pak-Poy’s letter to shareholders last week was at pains to talk about “intrinsic value” and reiterated that it wanted to an offer that was “fair value for all” investors.

The retail vs institutional battle is important at a time when Potentia & Co finished its four-weeks due diligence at midnight on Friday.

Potentia had plenty of help in the virtual data room - bankers (Jarden), consultants (Bain), accountants (PwC) and lawyers (JWS) - and is trying to pull a binding bid together. [It could take days or weeks to work through investment committee approvals and the like, given the number of parties involved].

Tyro’s institutional investors, which include Grok, have the lion’s share of the fintech’s register. However, Tyro does have a reasonably long retail investor tail for a small cap, with 20,538 shareholders holding 100,000 shares or fewer as at August. The small holders together owned one-quarter of the company.

M&A arb funds can see there’s a risk of the whole situation blowing up. They know there are a bunch of institutional sellers, even at the $1.60 a share rejected price, but see the energy Davey has injected into the company and worry its impact on Tyro’s board and retail investors.

Tyro shares last traded at $1.49. Any near-term equity market wobbles could be good for Potentia, provided funding markets stay open. The PE firm has HarbourVest, MLC, Cbus and Aware Super in tow for the offer, and a pre-bid commitment from Mike Cannon-Brookes’ Grok.