|Shares Out. (in M):||47||P/E||61.8||28.7|
|Market Cap (in $M):||380||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
Risks to the Stock:
As with any fast-growing company with a stock that has been moving straight up, identifying and timing the catalyst is the toughest part of a short. However, time and again, we have seen that companies that expand quickly off the backs of the poor and unbanked tend to blow up spectacularly. Here are some large risks for PAYS –
A) Secondary Offering: 40% of the stock is owned by the two founders. The company claims they don’t have any plans to sell in the near future – though the share price has moved up from $1.40 to +$7.50 over the last 24 months. The founders used to have stock worth $8M two years ago. Now it is worth around $150M. They may want to ‘lighten up’ just a bit
B) Where the heck is Elizabeth Warren when you need her? Ok, sure she is busy right now, but doesn’t this plasma-for-cash business seem almost perfectly designed for one of the ‘Progressives’ running for President to take on an as an issue to get some screen time? Even Trump could latch onto this – come on, these foreign companies are sucking the blood out of working-class Americans and shipping it overseas! Changes in the law regarding the sale of plasma donations or restrictions on its export would be devastating for PAY’s business model. Proper oversight of plasma donations requiring that the FDA rules are actually followed at these businesses would reduce the number of donations made.
C) Medicare for all: I have no idea if this might pass, but these pharma marketing program cards are not for Medicare/Medicaid patients. If Mr. Market believes there will be a large expansion of Medicare, PAYS’ new vertical would be negatively impacted.
D) Prescription drug price legislation. One of the very few things the GOP and Democrats agree on these days is that new drug prices are too high. The President announced recently that new bipartisan legislation on this would be released soon. Any reduction in drug prices, or lower prices for newly released medicines would be a negative for PAYS new pharmaceutical marketing business.
E) Execution risk: In the last six months the company has named a new CFO, Chief Legal Counsel, Chief Information Officer and Chief Marketing Officer. It is growing quickly and entering new verticals. Its guidance calls for very rapid top and bottom-line growth – small companies often are unable to scale up as quickly as promised.
F) Emergent competitors. GDOT, TSS, and others may decide that if TPNL is going to get into the GPR business, perhaps they may want to get into the plasma card business. Blackhawk and Incomm also might be interested.