Tracking the parallels
Ecsponent takes control of Mybucks which — under Dave van Niekerk — has, like Blue Financial, come under financial stress
Niche financial services group Ecsponent, which has been funded mostly by a series of high-yielding preference-share issues, has made a bold play for control of Frankfurt-listed fintech business Mybucks.
The co-founder of Mybucks is Dave van Niekerk, who will be familiar to many local investors as the founder and prime mover of controversial microlending group Blue Financial Services (BFS).
Van Niekerk is no longer listed as the executive chair of Mybucks, which suggests he departed soon after the terms of the Ecsponent investment were disclosed. Van Niekerk had signed off the recent six-month to end-december financial results.
There appear to be some parallels between BFS and Mybucks.
Van Niekerk left BFS under a cloud after the company racked up losses of more than R1bn in 2009, which prompted an urgent R463m recapitalisation of the company by a private equity firm.
A struggling BFS was suspended from the JSE in 2013, and the listing was terminated last year.
It seems that under Van Niekerk, Mybucks — like BFS — has found itself under mounting financial stress. Mybucks’ interim results to end-december showed a net loss after tax of €4.8m (R78.2m), with the net asset value of the company negative by €2.56m (R42m).
Ecsponent, an existing shareholder in Mybucks, intends converting loans — advanced to the struggling fintech business — to equity at a subscription price of €1/share in a transaction worth R450m (€27.8m).
The conversions will increase Ecsponent’s stake in Mybucks from 39.7% to over 50%.
This is a significant deal for Ecsponent, which has a market capitalisation of just R263m.
Mybucks has had a gradual fall from grace on the Frankfurt Stock Exchange after peaking at €19 in September 2016.
The share started this year at about €5.70 and had drifted to about €3.66 just before the announcement of Ecsponent’s conversion package.
Mybucks operates banking, lending and insurance services in more than a dozen African countries, with the number of active customers topping 1.5-million.
More than 2.3-million loans have been issued — with a value of €519m — in the eight years since inception.
Despite this brisk start it seems the initial euphoria around Mybucks’ offering of technologydriven financial services has worn off.
The big question is whether Ecsponent, which operates its own specialist lending businesses in Southern Africa for small to medium-sized enterprises, can rapidly find profitable traction at Mybucks.
Ecsponent CEO Terence Gregory points out that the loan conversion means a significant improvement in the equity side of Mybucks’ balance sheet.
He says this will drastically reduce finance costs, which will flow directly to the bottom line.
He adds that the bottom line could also be bolstered by management restructuring and the reduction of overheads.
“This process has already started and is being led by Ecsponent and new management.”
The interim results from Mybucks do indicate some growth at the top line, with revenue up at €37.4m (previously €30m) and operating profit slightly lower at €9.1m (€9.8m).
Profits were eroded by finance costs of €12.2m, while there were also marked increases in operating expenses at €7.4m (€6m) and employee costs at €10m (€7m).
Gregory contends Mybucks