I suggested to Ray Anderson, CEO of AIM-listed, Cambridge-based mobile payments and analytics player, Bango, that if the proverbial investor from Mars landed on Earth and read through today’s FY results statement (actually 9 months to 31st Dec. 2012), they’d see a business where revenues had plummeted, losses had soared and cash was haemorrhaging from various orifices. Then they’d look at the stock and see a share price that has pretty much doubled over the past 12 months (though down 9% as I write) and probably wonder how on earth (or Mars, I guess) that works?
Anderson (and CFO Gerry Tucker) patiently took me though the Bango business model and I guess I ‘get it’ in so far as it’s a land-grab in the mobile payments ‘space’, much as it is for Montise in mobile banking (see Monitise – Great Company? Great Stock? Both?). Our Martian investor will just have to take a view whether (a) Bango will ever be profitable and cash generative on a sustained basis and/or (b) someone will pay more for the shares than he/she/it.
Even Anderson and Tucker can’t posit on the timing of (a), though they understand the conditions that need to happen for Bango to turn profitable (basically, gross margins need to increase by somewhere between 50-100%). And I and won’t take a view on (b) as that’s not what we do.
It could be that our investor from Mars might think it would be a jolly good idea for Bango and Monitise to ‘join forces’ and tie up the global market for mobile payments and banking – what a great British success story that would be! But even our friend from Mars would realise that if you knock two loss making companies together it is unlikely to make one profitable one. But then again, what has that got to do with the share price?