Mobile commerce network Monitise (MONI:AIM) is believed to earn around 15% of its annual revenues from its agreement with Visa (V:NYSE), a deal that looks doomed beyond 2016. That is part of the fallout from the US credit card giant's decision to invest in its own inhouse network, a move that will at some point see Visa sell its 5.5% stake in Monitise, and saw the UK company's share price collapse by 30% last week to 27.75p.
But there's the possibililty that the bad news may get significantly worse. The market is particularly spooked the markets that other long-term and meaningful commercial partners could walk away, perhaps Visa Europe, FIS or Royal Bank of Scotland (RBS). Visa Europe, a separate entity to the US group, currently owns a 5.95% stake in Monitise.
According to analysts at investment bank Berenberg, joint chief executive officer (CEO) Elizabeth Buse, herself a former Visa executive, emphasised on a conference call two months ago (8 July) that there was no risk to Monitise's long-term relatoinships. That suggests that Visa's decision came as a bolt from the blue. 'If Visa chooses to develop expertise inhouse, why wouldn’t the others?' ponders Berenberg.
Monitise supporters may argue that IBM (IBM:NYSE) might acquire Monitise, the pair sharing a technical development pact. Yet unlike Visa, 'IBM is not a Monitise customer, nor does it own a stake in the UK business,' points out Berenberg. 'Two revenue warnings and now this, we can only see downward pressure on the share price,' say analysts at Panmure Gordon.