Zwipe: More Partnerships
Redeye Research Note 2020/06/18
Watchdata is the fourth announced card manufacturer partner (since the strategic review), following MDP, Toppan Forms and Asia Credit Card. These partnerships together indicate that card manufacturers are eager to partner with Zwipe. Watchdata is the sixth largest card manufacturer in the world with an annual production volume of 565m cards in total, albeit currently only 15m payment cards. The partnership is dedicated to Zwipe Pay ONE. We think the agreement will initially be related to payment cards, although it will possibly also come to include wearables. The press release reads that Zwipe will deliver key components and technical guidance. We guess this means the Pay ONE chip, passive inlays, and consulting.
Zwipe, on June 8, received an order from Toppan Forms – a group company of the larger Toppan Printing that produce 43m payment cards per year. The order comes just six weeks after the partnership announcement. Toppan Forms says it is eager to integrate Zwipe’s technology, including Pay ONE. This order is not related to the not-yet-ready Pay ONE though, and it is not a commercial order. However, according to Zwipe, the order is a natural next step in the process, indicating commitment and preparedness from Toppan Forms. We view it as something like a pre-series order (beginning of “small scale manufacturing”). Toppan Forms says it has allocated time and space in its production lines for production of biometric payment cards. Order volumes are insignificant, but Zwipe states the order is a necessary step in following the Pay ONE plan.
Watchdata was not the only piece of news today. Zwipe also announced a stock options program for e.g. senior employees and board members of in total 470 000 options. The exercise price of NOK 7.85 represents a discount of about 20%, in relation to today’s share price. The program is expected to lead to an increase in interest in the Company’s value development. However, we are not sure how effective the program will be since the options are already in the money, from the start. Zwipe comments that the exercise price calculation follows the fixed principles of the program, and refers to its other programs on substantially higher levels (up to NOK 25). We have also talked to the Chairman of the Board regarding the matter. The problem stems from the extreme volatility of the stock. Zwipe wanted to use a clearcut calculation method. It therefore based the exercise price on historical VWAP figures with a premium. However, shares tanked down to NOK 2.2 and are up over 350% since then.
As for other news in the ecosystem, Fingerprint Cards (FPC) in a recent presentation said contactless card adoption has accelerated. It expects big European banks to launch within this year, and thinks the industry has passed the big tech hurdles when it comes to volume production. Zwipe was not included as one of the inlay manufacturers in FPC’s presentation, which has created some rumors and speculation on the stock market. We see no uspide for FPC in terminating its Zwipe relationship, as it is FPC who sells to Zwipe, and not the other way around. Zwipe, being sensor agnostic, says it keeps on working with FPC and intends to continue to do so. Our view is that in this industry everyone collaborates with everyone, and we do not think that Zwipe and FPC will become an exception to that rule.