September 18, 2014 / 10:24 AM / 3 years ago

Monitise shares tumble as Visa explores options for stake

(Reuters) - Monitise Plc lost more than a third of its market value after Visa Inc, its biggest customer, revealed plans to divest its stake in the company and pursue development of its own mobile payment systems.

A Visa sign is seen on a cashier's desk at a restaurant in Yangon January 31, 2013. REUTERS/Soe Zeya Tun

Visa, the world’s largest credit and debit card company, said it was “considering its options” regarding its 5.5 percent stake in Monitise, which processes mobile payments, purchases and transfers worth $88 billion annually.

“Visa intends to continue increasing its investment in its own in-house capabilities and, as a result, reducing its use of external resources,” Visa said on Thursday.

Monitise, co-managed by a former Visa executive, is contracted to provide mobile banking services to Visa until 2016.

About 290 million pounds (about $475 million) of Monitise’s market capitalization was wiped off on Thursday, making it the biggest percentage loser on the London Stock Exchange.

With tech giants Google Inc and Apple Inc launching free mobile payment systems, the role of traditional mobile payment companies are under question.

“If I were Visa, I would ask: What is Monitise bringing to the table in a world of Apple and Google? The answer is a blank sheet of paper,” said Thomas Noyes, a financial technology investor and former head of channels at Citigroup’s Global Consumer Group.

Visa has hired J.P. Morgan Securities for considering options for the Monitise investment.

Berenberg analyst Ali Khwaja told Reuters that the discontinuation of the contract would mean an about 10 percent reduction in Monitise’s revenue.

“This is a big question mark on the management’s credibility (to deliver numbers). It also raises questions about Visa Europe’s stake and raises doubts about whether Visa Europe will continue to work with Monitise,” Khwaja said.

He added that the company’s contract with Visa Europe, which separately holds a stake of 6 percent in Monitise, was also worth about 10 million pounds.

Visa Inc and Monitise, which had hired former Visa executive Elizabeth Buse as co-CEO in June to focus on day-to-day operations, declined further comment.

Monitise’s largest investor Omega Advisors also declined comment. The U.S.-based hedge fund manager owns an 11.27 percent stake in the company, according to Thomson Reuters data.

Visa Inc first invested in Monitise in 2009, when the company’s revenue was about 3 million pounds and the mobile payments market was still young. It has reduced its original 14.4 percent stake over time.

Monitise, founded in 2003, has had a tumultuous 2014, with its stock falling about 37 percent this year through Wednesday’s close. The stock has been sliding since the company issued two revenue warnings as it moved to a subscription-based model.

The company’s shares closed down about 35 percent at 29.19 pence. The stock was the most traded on the London Stock Exchange with more than 162 million shares changing hands during the day.

Additional reporting by Abhiram Nandakumar in Bangalore; Editing by Robin Paxton and Joyjeet Das

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