Most investors will likely draw a blank when asked about Earthport (EPO:AIM). Yet this cross-border payments relative tiddler is now front and centre in an almighty tussle between US credit card giants Mastercard and Visa, the former today trumping the latter’s takeover offer with its own higher bid.
The story started back on 27 December 2018 when Visa tabled a surprise 30p per share, £198m cash offer for Earthport. It was backed immediately by management, and no wonder, since the share price before the bid emerged was below 8p per share, valuing the business at less than £50m.
Now Mastercard has come along a slapped its own 33p per share, £233m deal on the table.
ANOTHER TOUGH YEAR
‘Earthport had become vulnerable to a takeover after a tricky 2018, including the loss of a major customer, management changes and a plunge in transaction volumes but today’s news suggests its cross-border payments expertise is still recognised within the industry,’ says Russ Mould, AJ Bell’s investment director.
At least now shareholders get to sit back, watch what happens and keep their fingers crossed that Mastercard and Visa will keep upping the ante. They deserve something positive out of this otherwise dismal investment.
STOCK MARKET HALL OF SHAME?
Earthport has been a stock market disaster for donkey’s years. Listed on the junior AIM market since 2001, it has repeatedly refused to get even close to profitability in all of those long years, with management always talking up the bigger, better and brighter tomorrow, only to come cap in hand to investors time and again.
Earthport's long run of losses and cash burn
(full year to 30 June, £m)
| Revenue | Operating profit | Free cash flow | |
| 2018 | 31.9 | -8.45 | -7.73 |
| 2017 | 30.3 | -10.3 | -3.24 |
| 2016 | 22.8 | -8.08 | -16.1 |
| 2015 | 19.3 | -7.96 | -5.58 |
| 2014 | 10.8 | -6.35 | -5.71 |
Source: Company accounts, Reuters Eikon
Yes, some long-standing investors may feel hard done by. The Earthport share price had traded as high as 49p (in April 2014), and touched 80p odd in 2009, way above current offers.
Factor in the millions of pounds of good money thrown after bad though and this looks like as good an outcome as could possibly be expected by investors.
