After spending an unusual amount of time on the phone last night to my spread betting provider I’ve managed to open a short limit order on Monitise (LSE: MONI) since their platform would not allow me to execute the order online.
This was good news because it meant that in all probability their would be a restriction to short Monitise.
Sure enough the dealer advised me that there was indeed a restriction to short Monitise and he also advised me that if I wanted to short some more then I’d have to call in rather than deal online.
That suits me fine because a short restriction on a stock means that there are a lot of sellers in Monitise stock.
So why short Monitise?
Well their RNS yesterday caused Monitise stock to fall 27% in a single day after they’d announced that their strategic review that began on 22 January had now been concluded.
The strategic review itself included looking for a buyer for the company and low and behold nobody wanted to buy Monitise in it’s current state:
The Board received a number of expressions of interest from various parties. However, the Board concluded that none of these indicative and non-binding proposals fully recognised the longer-term value of Monitise.
The fact of the matter is they went looking for buyers who basically did not like what they were offered and so Montise now has to plod on in it’s current state which I’ll get to later.
Bottom line: if there was value in Monitise in it’s current form then it would have been bought and it’s as simple as that.
Not only that the co-founder and CEO stepped down yesterday.
But the crux of the matter is this little nugget from their ‘current trading guidance’:
Reiterate guidance for FY 2015 (revenue £90-100m and EBITDA loss £40-50m) and for EBITDA profitability in FY 2016.
I wonder what the loss will be after interest, tax, depreciation and amortisation?
The RNS is full of more woe which you can access here but the point is that Monitise is a loser.
On 27 February it issued nearly 13 million shares as payment towards an acquisition of a company called Clairmail Inc and Tom Winnifrith of Shareprophets has cleverly pointed out that this is probably because it doesn’t have the cash to buy Clairmail so instead it issues shares out of thin air that the owners of Clarmail can just sell on the open market whilst current shareholders get diluted.
Although Monitise has current assets of £173 million and total liabilities of £81 million it is losing money hand over fist:
- Loss per share doubled
- Less revenue than the previous year
- Higher cost of sales and operating costs from previous year
- EBITDA loss increased by over 200% from previous year
- Operating loss more than double the previous year
It is a total train wreck with what looks like another locomotive on the horizon hurtling towards it.
I only hope that my limit order is hit so I can get short of this stock.