TrustBuddy issued a press release this morning, which in our opinion shows how desperate the company needs shareholders approval for its massive new share issues to be approved at the extra-ordinary general meeting on September 18th.
Given a successful capital raise, TrustBuddy believes to have “sufficient funds to reach break-even in 2016”. As a reminder: the proposed capital increase comprises a preferential issue of 405,546,722 shares, which by itself will double (!!!) the company’s number of outstanding shares. This issue is expected to give the company SEK 61m before issuing costs. Once that is done, TrustBuddy wants to issue up to 200 million additional shares in a directed issue to “selected investors who have expressed an interest in subscribing to shares”. So far, TrustBuddy has not communicated their plans with the money raised in the directed issue. TrustBuddy also wants the approval from its shareholders to issue shares and/or warrants to reward is Board and management, i.e.: more dilution. We note that neither Board nor management has put any significant amounts of their own money in the company so far (with a few exceptions). We also note that there is hardly anything to be rewarded for.
Coming back to today’s press releases, TrustBuddy’s new Chief Product Officer, Chad Mazzola is quoted saying: “We intend to be a product and technology driven Company. We take the idea that “software is eating the world” seriously, and believe that our long-term success will be determined by the quality of our products”. TrustBuddy states that its focus on product management will be paired with a greater emphasis on data-driven member acquisition and retention.
The press release also includes a comment by TrustBuddy’s new CTO, Kevin Albrecht: “I’ve evaluated core banking, lending, and payment systems used by large global banks and can say with confidence that the new version of TrustBuddy’s platform is on par with, if not better than, leading solutions in the market.”
TrustBuddy states that it will begin releasing additional functionality enabled by this platform in Q4 2015 by gradually introducing longer-duration and higher balance consumer offerings. The company will then essentially have two key products, loans to small and medium enterprises (“SME”) and consumer loans with both shorter and longer maturities. Longer-term, we will standardize our offerings across all of our core markets. Whether this means a reversal of the previous management’s intention to phase out the short-term consumer loan product, is unclear at this point. We note that the launch of the SME product in Belgium seems delayed, nothing has been communicated about the launch in Sweden lately and that the existing SME business, Geldvoorelkaar (GVK), has had rather quite weeks lately in terms of new business.
In order to start its SME business in Sweden, TrustBuddy is awaiting a PSD license for which it has applied several months ago. We think there is a high likelihood that the application process will be delayed once more, now that a new management is in place and the application probably needs to be updated for the management changes etc.
We expect a rough ride ahead for the company and its shareholders. So far, there has not been any insider buying from neither management nor Board members, which we considers as very poor. Existing shareholders are diluted to an extend which is hard to comprehend, following a share price decline of more than 80% during 2015.