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Seeing Yellow Everywhere
I’ve been suffering lately from frequency bias.
It’s that phenomenon that behavioral economists are fond of, where something you recently learned about suddenly seems to appear everywhere. (sometimes referred to as “Baader-Meinhof phenomenon”)
In this case, I’m seeing bright yellow-colored Nayax card terminals, everywhere. Not just here in Israel but in recent travels in the US and Europe.
I trace it back to my initial due diligence on the Herzliya-based fintech firm’s $142 million Tel Aviv IPO last year.
That deal caught my eye because it was sort of an unsexy fintech, built by executives with real-world experience (read: not wearing black t-shirts in website mug shots) and because the stock was coming public on local capital markets, not via a New York SPAC. (see earlier)
Management earlier this month reported Q4 results that, while a penny more of a loss than what analysts expected, actually showed higher-than-forecast revenue of $32.3 million for the period, bringing the 2021 total revenue to $119.13 million versus the consensus $117.05 million. The 2022 revenue forecast is for $158.5 million.
It’s where that revenue is coming from that’s most interesting. Because according to the management’s earnings presentation, 74% of its customers are small- and medium-sized businesses. These are businesses that have weathered the pandemic and adopted new payments technologies (not always so willingly).
Recent moves show that Nayax going aggressive on that 74% of customers. A number of key new hires and job postings point to bulking up to support the SMB customers.
A new joint venture, announced last week with Israel’s Bank Hapoalim and a third local partner, will establish and operate an international platform to provide financing options for SMBs for acquiring income-generating IoT products. Same for its January deal to acquire On Track Innovations that should fast-track entry into the Japanese market.
After climbing to a post-IPO high of ILS 13.15 (~$4.18) a share in mid October, Nayax stock has fallen almost 46%. By comparison, the ARK Israel Innovative Technology ETF (IZRL) is down about 20% during the same period. Nayax is among the smallest holdings (1.08%) in that exchange-traded fund’s current portfolio.
The company filed with the SEC for a potential US initial public offering. However, a Nayax dual listing in New York is not likely any time soon, but not for reasons of company fundamentals.
CEO Yair Nechmad was vague in his only reference to plans on management’s March 9 conference call. “The commencement of the proposed
U.S. initial public offering is subject to completion of the rate review process reflects the share price and market and other conditions.
As for the “market and other conditions”? Bloomberg reported earlier this month that there’s a deal drought as the market suffers through its longest period without an IPO since Q1 2009. Recent listings have underperformed other stocks, with US IPOs – particularly Israeli companies – conducted over the past year now valued at 30% below their offering prices.
While Kaltura’s Going Nowhere
My second recent bit of frequency bias involves Kaltura, which has sputtered since its on-again/off-again IPO last summer.
What drew my attention to the flagging stock were three separate data points of employees leaving the video management firm. Now, I will acknowledge that job loyalty generally has suffered over the past two years. But within the last month, I’ve met three Kaltura staffers who have called it quits on the company. Each told of others about to abandon ship.
What’s going on?
Culture clashes, a lack of strategic direction and stock incentives that no longer provide an incentive, they told me.
The firm pulled its first try at a Nasdaq listing about a year ago, citing a lack of demand. That failure to launch was remedied in July with a scaled back – from $2 billion valuation to $1.3 billion – $150 million raise.
From an early $14 a share high, KLTR’s share price has sunk to $2.09. Fourth-quarter results proved to be a huge disappointment and the Street responded accordingly.
Goldman Sachs slashed its 12-month target price to $3 a share from the previous $5.25. Deutsche Bank followed with $2.50 from $5.50. Both have “hold” ratings on the shares. Street-high Needham is still telling clients to “buy” even though it cut the target from $15 (no, that’s not a typo) to $8.
Watch this space.