Monitise Launches App - Shares Drop 34%

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This is where you ask yourself, “Did I read that correctly? Wouldn’t a new app be a good thing?” Well, yes, you did read that correctly and, yes, a new app is a good thing. The problem is that the app announcement was not the only announcement about Monitise (LSE:MONI) today. The app announcement was good, but not nearly good enough to overcome the announcement that followed. The Monitise share price dropped 34% on the day.

© Image copyright asimzb

The First Announcement

In cooperation with PermataBank, Monitse reported that it will soon release a wallet app for smartphone users in Indonesia. The original BBM Money app was limited Blackberry devices and selected banks. The new version of the app will work on iOS and Android systems and will “enable payments at participating retail stores and online.” (I often find the use of the word “participating” to mean “limited.” That’s not a good thing.) Nonetheless, company President, Peter Radcliffe touted the app as a “great example of . . . how businesses can work together to give consumers a service which is genuinely more convenient than what they had before.”

Monitise has more than 30 million registered users of its mobile banking apps and it currently handles $88 billion is transactions annually. It’s not really likely that the new Monitise app would give the share price much of a boost, but the next announcement came like a blow to the solar plexus.

The Second Announcement

Visa, Inc. (NYSE:V) announced that, “given the maturation of Monitise as a company,” it had enlisted the aid of J.P. Morgan Securities to help it consider it options with respect to its 5.5% stake in the company. Visa Europe owns a 6.0% stake. While that may not be a direct hit amidships, the very next paragraph certainly was – “Visa will also be lessening its dependence on external mobile development resources.” That’s external mobile development sources, as in Monitise.

Rather like the glide angle of a brick, the Monitise share price dropped from 43.00 to a low of 26.98 before recovering to 29.74 by end of day. The last time that Monitise traded below 27.00 at closing was 24 June 2011. It was 04 December 2012 when it last closed below 30.00, when it hit 29.75 ahead of Christmas.

What Lies Ahead?

I don’t think we can say for sure at this point, but let me sit in the Visa COO chair for a minute. I think I would be asking myself why I would let my company be dependent upon another, albeit expert, company to develop technical services that we could do internally. Yes, it was a wise move to tap into that external expertise in the past when we needed it the most, but if we don’t stop feeding this animal, it’s going to take a bite out of us whenever it wishes. I think we’ve helped them enough. It’s time to move on. And I’m not even taking into consideration what is becoming a string of profit warnings.

By his own admission, Monitise founder, Alistair Lukies, said that “Visa, Inc. has been a huge support in helping Monitise develop and grow into the world’s leading, independent mobile money company.”

That’s exactly what I am saying.

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