Give a man a fish, he eats for a day. Teach a man to fish he eats for a lifetime.
This is the mantra being undertaken by marketing tech company Rewardle (ASX: RXH) which is passing on up to $60k worth of fees for a 1% equity stake in buy-now-pay-later operator SplitPay.
At that ratio, it implies a valuation of $6 million for the UK-based BNPL operator, which Rewardle provides with marketing services in the UK and European markets. The fees, up to $60k on a cash-to-equity agreement, cover Rewardle’s services for 3 months but may be extended by mutual agreement.
“Through our work with SplitPay over recent months we’ve identified a number of high growth opportunities where we can leverage our experience, capabilities and IP to help them innovate, differentiate and grow,” said Rewardle Founder and Executive Chairman, Ruwan Weerasooriya.
“For example, we believe that buy now, pay later can follow in the steps of traditional credit cards to power a substantial points and rewards opportunity.
“Converting of our cash fees into SplitPay shares gives us direct exposure to the Buy Now, Pay Later sector, the UK market and upside generated from our services work. It also elevates the nature of our relationship from service provider to shareholder and creates a stronger basis for establishing a deeper strategic relationship.”
SplitPay is a privately held company founded in 2018 focusing on the immature BNPL market in Europe where existing operators AfterPay (ASX: APT), Zip (ASX: Z1P) and LayBuy (ASX: LBY) are still in the market entry phase. Subsequently, many of SplitPay merchant customers offer multiple BNPL payment options including those aforementioned as a low-cost means to cover the market of retail customers.
To date, SplitPay has raised more than $2 million from investors and previously actioned a similar services-for-equity deal with digital payments company Novatti Group (ASX: NOV) which is a major shareholder.
As an unlisted company however, SplitPay does not disclose its merchant numbers or total transaction values.
This services-for-equity deal with SplitPay follows a similar strategy by Rewardle which has secured equity stakes in Beanhunter and Pepper Leaf via options agreements and software licensing with Cardiac Rhythm Diagnostics. These are all underpinned by marketing services provided by Rewardle which connect over 3 million members with thousands of local businesses.
Despite the relatively small value of the cash-to-equity stake, RXH shares responded surprisingly well to reach a high of $0.035 in morning trade which represents an 169% increase on their previous 0.013 close.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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