Short sellers circle Monitise amid profit warning

Monitise, the mobile payments company being circled by a wave of short-sellers, issued a second profit warning in four months on Tuesday as the group admitted that delays to large contracts meant it would miss sales forecasts.

Shares fell as much as 22pc, worsening a sharp decline in recent weeks that has seen one of Britain’s most promising technology companies become one of the UK’s most shorted stocks.

According to data from Markit, 8.9pc of Monitise’s shares were out on loan ahead of the unscheduled trading update.

Short sellers – who borrow shares in a company and sell them, betting that the price will fall so they can be bought back and returned at a lower price – turned their attention to Monitise in April.

Short interest in the shares has increased by 43pc in the last month, Markit said.

JP Morgan Asset Management, Jericho Capital and hedge fund Coatue have all taken significant short positions.

^{Source: Markit}

On Tuesday, Monitise said it would report annual revenue growth of between 31pc and 33pc in the year to the end of June when it reports in September, against a previous 40pc forecast. This was the second downgrade after it reduced guidance from 50pc in March. As a result, it said it would make a loss of between £32m and £36m, against market forecasts of £28m.

Alastair Lukies, Monitise’s co-founder who recently split chief executive duties with Elizabeth Buse, a former Visa executive, said the shortfall was due to two large contracts being delayed as Monitise moves from selling its technology via an upfront licensing fee to a subscription model. He said large companies had attempted to barter over payments, and that Monitise had chosen to defer revenue rather than sign poor deals.

“We are bumping into some big ships and making sure we are giving investors maximum upside,” he said. “We are not allowing ourselves to be squeezed into these deals.”

Monitise shares fell by 22pc before rebounding over the course of the day to close 4¼, or 8.6pc, down at 45p. This compares to a high of over 80p at the start of the year.

Investor interest in Monitise surged last year as consumers turn to their mobile phones to bank and make payments. Institutions including Royal Bank of Scotland and Visa use the group’s technology, while it has expanded aggressively, twice turning to investors to raise more than £200m. The company said it still planned to break even in 2016 and had “increased confidence” in a target of 200m users by mid-2018.

Mr Lukies, who founded Monitise in 2003, said he was not concerned about the short sellers betting on falling share prices. “It gives the bears an opportunity to make a bit more money but it’s just people playing around with the stock, it's not to do with the fundamentals of the company,” he said.