A unicorn brewing? Institutions back Novatti with $40m investment

Since offering their last capital raise to accelerate growth, digital payments company Novatti Group (ASX: NOV) has increased its market cap by more than 200% which was one reason institutions were keen to get involved with the Aussie fintech and their latest expansion plans. 

The cornerstone of what will be a total $45 million raise is Novatti’s strategic investment in accounting software company Reckon (ASX: RKN) of which they have secured a 19.9% equity stake from existing shareholders. Specifically, Novatti has identified an opportunity in Reckon where they can tap into a converging market of business automation software and payments processing and are so keen to do so that they’ve backed Reckon themselves for an equity stake in the upside.

“With revenue of more than $75 million, EBITDA of more than $32 million, and a rapidly growing pool of more than 100,000, cloud-based customers, we believe this stake in Reckon presents an attractive investment for Novatti,” said Novatti Managing Director, Peter Cook. 

“As a payments company and, in particular, leveraging our experience with Emersion, we know that there is a tight synergy between business automation software and payments processing. 

“For software clients, this combination drives increasing productivity. And for providers, it drives a strong economic return based on cross selling. We believe Novatti’s strategic investment in Reckon will open up new opportunities to explore synergies and deliver growth in the Novatti business.” 

Accounting, invoice automation and digital payment collection is well known to Novatti which wholly owns business automation software Emersion. Since acquiring the business and integrating it with Novatti’s wider digital payments and regtech businesses, Emersion has grown rapidly and was launched in the United States earlier in the year. The software is also fully compliant with the different tax codes between States in the US, one of the biggest hurdles to accounting software in the US. 

Of the $45m raise being led by sole manager Petra Capital, $40m has been placed with institutional investors and $5m will be offered to existing Novatti shareholders under a Share Purchase Plan. The Offer Price for both is $0.55 per new share.

With the 19.9% stake in Reckon secured for $22.5m from existing RKN shareholders, Novatti intends to use the remaining funds raised to expand their growth in digital payments, including via an acquisition if the right opportunities present. 

Since raising $10.2m in June 2020 when shares were offered at $0.25 each, Novatti has gone from strength to strength as a global player in the digital payments space. This saw the Company triple its market cap over the past 12 months where it’s growth has seen Novatti selected by Marqeta and Afterpay as partners for their launches in Australia and New Zealand respectively. 

The biggest corporate activity of all for Novatti may still be to come however, with the Company having lodged an application for a banking license. With the licence in process with the Australian Prudential Review Authority, Novatti’s banking business recently secured $18m in funding commitments, including from BC Invest which has an international loan book of more than $1.1 billion. 

Given the continued growth of Novatti and the international momentum it’s been building over the past 12 months, it’s clear why institutional investors have shown such interest in Australia’s next potential unicorn. 

*Owners of this website are shareholders in a company mentioned in this article and have been engaged by them to assist in investor communications