Anyone got any thoughts about the Taptica (TAP) placing to raise $30m ? They had $32m in the bank already .....

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16th Jan '18 by weycome45

10 comments 4469 reads

Just wondered if anyone else was as confused as me regarding the placing ?

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Weycome45

Premium Member

10 comments

mikebianchi

16th Jan '18

It's a fair slug of cash and I guess we all have expenses (well the odd replacement car or boiler), the institutions have bought in I believe so I have taken the opportunity to top up, just going from the chit chat on ADFN. I bought in when Martin Sorrell was on a programme a few weeks back, he was talking about the fundamentals changing re the advertising market, mobiles are a global device even in parts of India & Africa you can see all sorts on their phones.

willhampson

16th Jan '18

I think it's fair to question substantial director sales, but, on balance, here I see two reasons for not being personally concerned: (i) Hagai Tal still retains a very substantial holding; and (ii) there is a stated reason for the sale - an imminent CGT liability - that appears plausible.

As to negatives, I thought the level of discount for the placing was on the high side which, to me at least, seems to run contrary to the suggestion that it was "oversubscribed". I also don't really understand how they can say it was "oversubscribed" when the stated intention was to place 5 million new shares (see 15 Jan. RNS) but they actually only placed 4.85 million new shares (see 16 Jan. RNS). Perhaps a small point, but I thought it was odd nonetheless. Note, how the desired director sales were completed in full...

All in, I still remain positive about Taptica International (LON:TAP) but am not minded to add to it at the current prices. I do think the context of the placing is pointing to a fairly significant acquisition being on the horizon, which could add some upside in the future.

maffs0

16th Jan '18

Basically what has happened is

the company has raised £22m by selling new shares to institutions at £4.50.
The CEO, Hagai Tal, has sold shares he owns to raise about £7.5m again at £4.50. The Company does get any of this money, it goes to Mt. Tal. He can't sell any more shares for a year.
Another guy called Ehud Levy (someone might know his relationship to the company) has sold shares he owns to raise about £9m again at £4.50. The Company does get any of this money, it goes straight to Mt. Levy's company "Smart and Simple". He can't sell any more share for 3 months.

The plan is that the company will use the £22m raised to pay off some debt which will enable them to take advantage of any good acquisition opportunities that come along.

The downside of this to current shareholders is that it will, somewhat, reduce the demand for shares from institutions going forward (at least for a time: could be just a few days or a few months or even longer!). It has also led to the big fall today in the share price. A possible upside is that it may well put a floor under the price as a lot of institutions will now be inclined to "support" the share price at this level. This doesn't always work though as I have found to my cost with IQE which raised money at £1.40 only to see it come down and through that level.

Perhaps a more equivalent example though would be XLMedia (LON:XLM) which at the end of March 2017 did something very similar. The price fell about 10% below the placing price before going on a strong run to almost double in price in 9 months.

Hope that helps. FWIW, I am looking for an opportunity to get in as this has been on my watchlist for a long time.

JohnEustace

17th Jan '18

Coincidentally XLMedia (LON:XLM) followed suit with a placing last night raising £31.7m at 198p vs a closing price yesterday of 205p.

weycome45

17th Jan '18

Thanks all .. I did notice XL Media have followed suit too and done same thing ..perhaps its a trend

nicobos

17th Jan '18

M - Taptica International (LON:TAP) ran a secondary placing last July which was placed at 385p. The share price did dip (usually on low volume selling) to just above 300p during the autumn but has bounced back strongly to 500p+ before the current placing.

Using this as a precedent, I would expect some softness in price but will use this as an opportunity to top up if it's driven by low volume PIs. Buying on the dips and top-slicing the spikes has been a good strategy so far!

As usual, earnings upgrades and an enhancing acquisition should propel it higher if you are prepared to be patient.

In any event, a longer period of share price weakness will see this become an acquisition target IMHO as the WPP's of this world look to acquire Companies exposed to faster growing markets to future proof their business models.

Dyor etc.

malcolmbell

17th Jan '18

The autumn was devoid of news whilst they digested Tremor correctly. The next few weeks are likely to be full of news...

weycome45

20th Jan '18

All good comments thanks for the input .

VegPatch

23rd Jan '18

I am a bit more circumspect about Taptica given its reliance (I think) on Facebook.

How does Taptica work ?
a good explanation is provided here on a blog site: https://thebritishinvestor.com... the blog goes on to say
"In a nutshell, Taptica parter with advertisers who leverage use of their database of 220m+ users to deliver targeted and timely ads via different media channels. This use of ‘big data’ allows advertisers to be more surgical and cost-efficient in their advertising, and gives them detailed insight into user behaviour. "

from the annual report this is clearer in terms of how Taptica gets paid

Now the issue to me is the reliance on certain channels like Facebook. What if the pricing for getting adverts on Facebook has risen well above what the advertiser is prepared to pay? Do you just deliver them less impressions or do you deliver fewer Facebook impressions supplemented with a few less-valuable Instagram impressions? There are many references to Facebook on its website (see below)

I may well be very wrong on this reliance on certain channels, BUT...

...the recent trading statement appears to bare this out (or to me at least suggest the revenue line is going less well than previously forecast)

"As a consequence, the Company expects to report adjusted EBITDA for FY 2017 ahead of market expectations and revenue broadly in line with market expectations demonstrating a higher-than-expected EBITDA margin. The Company remains confident of delivering solid year-on-year EBITDA growth for 2018 in line with market expectations.

(Italics mine)

'revenues Broadly' we know means a bit below expectations.

But why is this happening?

I suspect Taptica is being priced out of its core market. Also it talks about EBITDA for 2018 after mentioning revenues and EBITDA for 2017. Leaves me suspicious...why are revnues for 2018 not mentioned?

You can keep profits up for a while if revenues disappoint but eventually gravity takes hold.

Just a hunch and i am really happy to be shown to be wrong. I have no position either way but thought I would voice my concerns.

VegPatch

deltrotter

23rd Jan '18

The brokers said that Taptica had stopped undertaking certain types of advertising (particularly via Tremor) that they felt was unprofitable and that was the reason for the revenue remaining in line with expectations.

To be honest, I like a company that focuses on profitability rather than revenue!

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Anyone got any thoughts about the Taptica (TAP) placing to raise $30m ? They had $32m in the bank already .....

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Weycome45

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