Monitise and Scancell AGMs, and the Wonders of the Nominee System

Monitise (MONI) was one of those stocks for speculators in the past. One of those technology shooting stars that got to a ridiculous valuation under former CEO and founder Alastair Lukes. But despite numerous fund raisings it never managed to reach profitability. The business model chosen never turned out to be of value and the market needs also changed. So he has departed, a new management team is in place, and substantial restructurings have been implemented. The company has also revised its product and sales offerings with more focus on repeat revenue rather than license sales. But it is really betting on a new product called FINKit to revitalise sales in the future. Revenue had been falling rapidly but has now stabilised according to the Annual Report and it also reported a half-year EBITDA profit for the second half and perhaps more importantly, positive cash flow.

The AGM took place on the 19th October 2016 in the City of London at 10.00 am. I bought a very few shares recently as I have an interest in the financial technology sector. A full report of the meeting is on the ShareSoc Members Network but I will just highlight one issue that arose and give a summary.

The voting was undertaken on a poll (far from my ideal way of doing things), but the proxy counts were displayed. I questioned the votes cast against the share buy-back resolution. These were actually reported as less than the votes I had submitted against that resolution (both directly as a personal crest member, and indirectly via two nominee accounts). It later transpired that there were no votes from the nominee operator – just one more bit of evidence of the wonders of the nominee system!

One simply cannot rely on nominee operators to collect or submit votes and there is no clear audit trail when votes do not appear to arrive. This is one good reason (there are lots of others) why this system needs to be reformed so all shareholders (including “beneficial owners”) are on the register.

The results of the votes were declared later in the day – all resolutions passed by over 99%, but only about 10% of shareholders actually voting which is a very low number in comparison with most companies. Perhaps shareholders have totally lost interest in their investment after the dramatic fall in the share price over the last two years (down from a peak of about 80p to 2.5p recently). Or perhaps a lot are in nominee accounts and either find it difficult to vote or their votes did not arrive.

Summary and comments: A useful AGM in terms of learning more about the business. Clearly though it depends on the future sales of FINKit and progress there seems to be slow. Investing in the shares now would clearly be a bet on the future success of that product and although I do not doubt that there is a need for such technology, selling a new solution is always difficult. Until they get some “satisfied customer” stories under their belt, it is not likely to take off. In the meantime they are reliant on their legacy businesses and revenue from pilots and consultancy work. The market is therefore unlikely to change its view on the business rapidly. However its market cap is only about 1 times revenue at present which is a lowly valuation for such businesses.

There is also a very good report on the Scancell AGM on the ShareSoc Members Network by Tim Grattan.

Roger Lawson

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