Why Boku shares just plummeted to 10-month low

A former AIM star rewarded for tripling in value from its IPO price has fallen spectacularly again. Graeme Evans reports on Boku's fall from grace.

It's been quite a debut year for Boku, whose spectacular share price performance caught the eye of the Newcomer of the Year judges at the recent AIM Awards.

Unfortunately for Boku and its investors, that accolade coincided with an equally spectacular unwinding of those gains to leave the stock back near to where it was when it listed last autumn.

This was accelerated by today's announcement that Boku, whose technology enables mobile phone users to buy goods and services and charge them to their mobile phone bill, is making a major acquisition in the United States.

The deal for Californian mobile identity and authentication solutions business Danal will be earnings dilutive in the 2019 financial year, as Boku intends to focus on investing in its new loss-making acquisition.

Earnings should improve from 2020, but that wasn’t enough to stop its shares falling 18% during an already tough session for telecoms stocks.

Source: TradingView (*) Past performance is not a guide to future performance

Danal's mobile identity platform enables customers, including financial institutions, government agencies and retailers, to manage risk and fraud and to ensure they meet Know Your Customer compliance.

The deal will accelerate the development of Boku's own mobile identity service offering, allowing expansion into new merchant segments, such as finance and government as well as broader exposure to the US market.

Boku customers include Apple, Google and Spotify, while Danal's client base features Western Union, PayPal and BNP Paribas. Boku expects to pay just over US$29 million in mostly shares for Danal, with another $64 million dependent on future performance. 

Boku shares jumped 27% to 75p on their first day of trading in November 2017, after a significantly oversubscribed placing of shares by Peel Hunt at 59p raised £30 million for selling shareholders and £15 million for company expansion.

This set the tone for a rapid rise to 184p by September, resulting in the prestigious AIM award in October. Judges said Boku would have been a strong contender for Company of the Year were it not for its short history as a public company.

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Boku continues to report strong trading, with a separate update today showing a 124% jump in Total Payment Volumes in the 10 months to October to US$2.8 billion (£2.2 billion). This compares with growth of 153% for the first six months of the year. Monthly active users reached 12.2 million in October, up 83%.

Boku's platform makes a consumer's mobile phone number an easy and secure payment method, providing an alternative to credit and debit cards. The company is led by CEO Jon Prideaux, who started Visa Europe’s ecommerce division and has more than 25 years of payments experience.

He said the addition of Danal would improve the mobile experience for users:

"Mobile commerce is booming, yet many tools were developed to support PC-based commerce. Danal has shown that mobile network operator data can also combat fraud, reduce friction in signup and ensure regulatory compliance on mobile."

*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.