Sell Earthport at 22p
Argues Lucian Miers, the Bard of the Boleyn
Evil Knievil recently highlighted Earthport (EPO) on www.t1ps.com and his diarist recommended selling them at around 30p. Having had a look at the company I have to agree with him and have sold short at 23p – where the market cap is still £19 million..
Earthport “owns provides and hosts an international money movement platform called the Universal Payments Network”. It has been going for ten years and invested around £70 million in the business. To date as far as I am aware the company has not turned a profit.
Its recent results were disappointing: Earthport lost £6.9 million on declining revenue of £1.5 million, much worse than Panmure the house broker had forecast and its net assets dwindled to £138,000. Its cash outflow was a worrying £5.1 million.
Part of the reason for this was the non appearance of £2 million receipt heralded in an announcement of January 7th this year from a mysterious, unnamed Middle East “partner”. The money was due within six months and its non receipt was announced nine months later, which seems a little late.
The company has long been a private client favourite and the constant object of bid speculation. Indeed it was until recently in a formal offer period having announced a strategic review that included the sale of the company. Unsuprisingly no bid was forthcoming.
Earthport’s coffers were slightly increased post the year end by a £1 million loan note which the company says has been fully subscribed for. It gave no details about the coupon on this note, who subscribed for it or what security was given against it. In any event given Earthport’s cash burn it is touch and go whether this sum would last them till Christmas and only serves to underline their inability to raise significant equity, the normal route in these circumstances.
Given Earthport’s turnover it does not look like their product is gaining much traction amongst financial institutions and I would be surprised to see the majors doing business with a company with such a precarious balance sheet.
There must be a real chance that Earthport’s days are numbered without a dramatic upturn in their business and I am happy to be short even at these levels.
Lucian Miers is East London’s most feared short seller. He writes twice a month on www.ShareCrazy.com
Posted by ShareCrazy on Oct 28, 04:10 PM in Comment- Post to: del.icio.us
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good article
fyi…epo website states loan note unsecured and coupon of 7%
— carnoustie · Nov 24, 03:12 PM · #