Company overview

Zwipe: More Skin in the Biometric Payments Game

Redeye Research Note timeStamp 2020/09/08

Redeye reiterates its valuation of Zwipe, following the directed share issue of NOK 96m, which was in line with our expectations.

Overall, the directed share issue looks solid thus far. The discount was only 6% and the stock market welcomed the offering with a 7% surge. In addition, insiders participated to a large extent. The COB, Jörgen Lantto, increased his holdings by 64% or NOK 5m. The CEO, CFO, CTO and EVP of Strategy & Channels were all allocated NOK 300 000 each (20 000 shares per person). Thus, the skin in the game continues to increase significantly following the insiders purchases earlier this year, which we generally view as an important aspect when it comes to investing in small cap tech stocks. The CEO now holds shares of over NOK 8m, and Management together control almost NOK 10m. We also find it positive that virtually the whole management team (with the exception of the COO) participated.

The offering means a major de-risking of the case, as financing was the largest risk. If the monthly OPEX would continue to average NOK 5m, the cash, including the NOK 96m raised and grants of NOK 15m, is not quite sufficient in relation to our current estimates of the timing of break-even, albeit relatively close. There was no statement of adequate funding until break-even, although Zwipe stated the money will get it through commercial launch in 2021 and beyond, based on the current business plan (that remains unchanged, by the way).

Zwipe states the ownership structure has improved with new, high quality, institutional investors from Stockholm, Gothenburg, UK and US. We await next ownership report before eventually adjusting our ownership rating. The offering was oversubscribed and, as mentioned above, it got a good reception on the stock market, although there is always a risk of overhang from short-term-oriented traders looking to make a quick buck.

A subsequent offering of NOK 15m will be made at the same price (NOK 15) due to Norwegian regulation of equal treatment of investors. We expect it to be closed in Q4’20.

Another significant and encouraging market milestone of today was the first volume production order for Zwipe’s partner Idex. The order is for the latest (third) generation of TrustedBio, i.e. a competitive, cost-efficient, single silicon card. We find it unlikely that the so-called tier-1 customer who placed the order could be anyone else than Idemia. Regardless, the customer seems to have a strong confidence regarding the Pay ONE platform being on track, and in demand from end customers. If there would have been any noteworthy uncertainties around the Pay ONE platform, we do not think it would make sense to order commercial volumes at this point. As far as we know, Idex is the only fingerprint sensor player that has a full certification from Mastercard, alternatively Visa, which suggests that the technology has improved significantly compared to the first generation.

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