Between the Greek government’s reenactment of “The Boy Who Cried Wolf” by threatening loudly to breakup with the euro (and realizing no one really cares), the Chinese government potentially threatening to breakup with the free market and Reddit breaking up with interim CEO Ellen Pao, you might be waking up this morning wondering who else broke up with or broke off with whom last week.
And we’re here to offer your quick morning guide to what’s next with our weekly data dive.
It’s The End Of The World As PayPal Knows It (And They Feel Fine — And Will Feel Better With Xoom)
In just one week, PayPal as it is known today will be no more, and in the words of that legendary rock group, Whitesnake, will go again on their own and get the IPO machine revved up.
And while we at PYMNTS like to envision this week at eBay looking a bit like your last week of high school with both tears and promises to “always stay in touch and be friends,” we have to imagine that it is some comfort to PayPal that the bulk of analysts believe PayPal’s valuation when it hits the market as its own entity will be worth about two-thirds of what the combined eBay/PayPal entity is today —between $40 billion and $45 billion.
It’s one of the many things that has the about-to-be PayPal CEO Dan Schulman feeling pretty chipper about the future — even with all the competition from the various “Pay” players in the market, namely, Apple, Google and Samsung.
“PayPal has always had competition,” Schulman told the Financial Times. “When you have an extremely large market, growing at a nice clip, that always invites competition.”
According to Schulman, PayPal’s brand and network of both consumers and merchants leave no room for concern. They jump in the payments space as an independent financial services competitor leveraging a consumer base of 155 million active customer accounts. Schulman said 155 million is a nice starting place, but one they are going to build on by democratizing the way that people manage their money in a digital world.
“It is expensive to be poor,” he said. “Technology should make managing and moving your money a right, not a privilege.”
Bringing financial services to an even broader audience feeds into Schulman’s belief that PayPal stands as a true example of a “technology-enabled financial services platform with global scale.”
That will continue to expand as Schulman and the PayPal team use the $6 billion in net cash — its eBay dowry, if you will — to expand its business and services.
“We’ll use that balance sheet to look at potential acquisitions,” Schulman said. Just last week PayPal announced the acquisition of international money transfer provider, Xoom, for $890 million in an all cash deal.
But that acquisition may have hit a little speed bump, all in the name of making lawyers richer.
As it turns out, former U.S. Securities and Exchange Commission attorney Willie Briscoe, along with a securities litigation firm, Powers Taylor LLP, are investigating potential claims against the Xoom’s board of directors. The claims relate to the price of the shares, which the attorneys suggest undervalue what each individual share is actually worth.
“Under the terms of the agreement, Xoom shareholders will only receive $25.00 in cash for each share owned, which is virtually no premium over the 52-week high and significantly lower than at least one analyst’s estimated value of $32.00 per share,” the release on the investigation notes.
The firms are encouraging impacted investors with information related to the deal to contact them to determine the “fairness of the proposed transaction.”
“The investigation centers on whether Xoom’s board of directors is acting in the shareholders’ best interests, whether the board considered alternatives to the acquisition and whether the board has employed an adequate process to review and act on the proposed transaction. Notably, at least one analyst with Yahoo! Finance believes the true inherent value of the stock could be as high as $32.00,” the release continued.
At $25/share, the acquisition represents a 32 percent markup on Xoom’s three-month, volume-weighted average price, according to the news release on the transaction. Guess they didn’t read that part of the news release.
The news of the acquisition broke July 1, indicating that the decision was approved by the boards of both companies, along with eBay’s board.
Xoom’s shares surged more than 22 percent on July 1 after the news of the acquisition by PayPal broke. The shares held steady into the following weekend after news of the acquisition surfaced.
“Becoming part of PayPal represents an exciting new chapter for Xoom, which will help accelerate our time-to-market in unserved geographies and expand the ways we can innovate for customers,” John Kunze, president and CEO of Xoom, wrote on July 1. “Being part of a larger, global organization will help us deliver the best possible experience to our customers, while maximizing value for our shareholders.”
When the deal goes through, Xoom will continue to operate as its own service but under PayPal’s umbrella.
Mo’ Trouble For Monitise
British payment player Monitise got its latest piece of bad news this week — it looks like Visa Europe will be further cutting its stake.
Five years ago, Visa gobbled up 14.4 percent of Monitise as part of a five-year, $13 million partnership deal that from Visa’s side never quite panned out. The firm has cut that percentage down over the last few years as Monitise has failed to hit several breakeven targets as time has gone on.
On Wednesday (July 8) sources at both firms confirmed Visa will reduce its remaining 5.3 percent (115,750,000 shares) of Monitise by sale, but gradually.
“Monitise and Visa Europe will continue to work together on a number of projects and services under the three-year commercial agreement which runs until [March 31, 2016]. Both parties look forward to working together for the duration of this commercial agreement and will assess on an ongoing basis opportunities to work together in [the] future,” the embattled Monitise noted in a statement.
Markets shrugged at the news, likely because with the year Monitise has been having, this loss was anticipated and built into the share price.
The firm kicked off 2015 with the announcement that it was putting itself up for sale — as their transition to a product-based recurring revenue model from a software licensing model was struggling to take hold. By early 2015, Monitise had seen a 47 percent drop in license revenue to around $6.6 million. Development and integration revenue also took a tumble — down 13 percent to around $33 million. For 2015 in total, Monitise is forecasting a full-year EBITDA loss of $60 million to $76 million, although the company does anticipate being EBITDA profitable in FY 2016.
That sale never materialized — as Monitise was unable to come to an agreement on its value with a potential buyer — and the firm has spent much of this year revising down its projected revenue.
About 10 days ago, Monitise issued yet another revenue warning that estimates its full-year results for 2015 will be between £88 million and £90 million ($137 million–$140 million). In March, Monitise said it had expected revenues to be between £90 million and £100 million ($140 million–$155 million).
Even with its myriad of recent difficulties, Monitise has affirmed that despite the latest round down, the firm will once again be profitable by 2016 — although still anticipating a full-year loss on earnings before interest, taxation, depreciation and amortization.
This is all the more interesting because Monitise CEO Elizabeth Buse was a senior member of Visa’s executive team. Before Charlie Scharf was brought in as the CEO of Visa in 2012, it was widely speculated that Buse was a contender to fill the role. She left a little under 18 months after Scharf was named CEO, following an attempt to stage a board coup in her favor before Scharf was brought on board.
Consumers To Digital Wallets: “We’re Still Not Really That Into You”
All the cool kids want to be digital wallets — from the big name players to the emerging startups.
There’s just one problem. Consumers don’t seem to be all that into actually using digital wallets. And a newly released analysis from Gallup gives some insight into why consumers aren’t so tuned into the digital revolution.
The research identifies the three types of customers the digital wallet companies are after: fully engaged, indifferent and actively disengaged. The trick to engaging digital wallet users is clear, the analysis suggests:
Yup. Someone dedicated money to commission a poll to figure that out.
The survey results showed that the most engaged users were most likely to use their digital wallets at grocery stores (48 percent had done so in the past 30 days — gee, we wonder why that is), along with department stores (27 percent), specialty stores (25 percent) and convenience stores (21 percent). That correlates remarkably with where, oh, NFC terminals are! Whole Foods, Macy’s, Disney, Panera, Walgreens — you get the idea.
“Ultimately, the digital wallet products that will win in the marketplace will do more than make users feel special — or be helpful or easy to do business with. To increase customers’ engagement with the product and win future business, digital wallet providers must consistently deliver on their brand promises at every customer touchpoint and interaction,” the analysis stated.
The analysis suggests that engaged customers not only feel privy to using the digital wallets, but they become brand ambassadors as well. And once hooked on a brand’s digital wallet, they are more likely to latch on to the next one that launches, and so on.
“For example, nearly all Apple Passbook users who are fully engaged (96 percent) say they are very likely to start using Apple Pay — Apple’s digital wallet — in the next 12 months,” the analysis concluded. “In contrast, users who are fully engaged with a competing digital wallet, such as Google Wallet or PayPal, are very unlikely to switch to Apple Pay and plan to stick with their existing product.”
Wow wee. How did we ever live without those insights?
That survey is based upon a Gallup Panel Web study that involved 11,043 adults in the U.S., aged 18 and older, that was conducted at the end of 2014. Those results were combined with another Gallup Panel Web study that involves 6,032 adults, aged 18 and above, that concluded just after the start of 2015.
So to recap … PayPal is ready to break out of eBay, Visa Europe has broken up with Monitise, and consumers aren’t engaged enough with digital wallets to fall in love — much less break up — with them.
So, go forth now and dominate that Keurig conversation at the office.