It's fair to say that emerging payments and identity verification company iSignthis Ltd (ASX: ISX) has had a pretty eventful 2019. The company's shares began the year trading at just $0.15, but skyrocketed a scarcely believable 1000% to hit an all-time high of $1.765 by early September. But since then an ugly stoush with governance firm Ownership Matters has hurt investor confidence in iSignThis, causing its share price to seesaw wildly.
As at the time of writing, it was valued at $0.98 – and where it goes next is really anyone's guess. At one point yesterday the share price had plummeted over 30%, but it ended up finishing the day just 8.4% in the red.
For some tech investors, this might be all too reminiscent of the collapse of another former market darling, GetSwift Limited (ASX: GSW). That company had rocketed to similar highs back in late 2017, before being hit with allegations that it failed in its disclosure requirements by not updating the market about key contract cancellations. In a matter of weeks almost 90% of its market cap was wiped out, and it is still facing class action lawsuits from disgruntled investors.
It should be noted that the allegations contained in the Ownership Matters report are of a completely different nature to those that contributed to the downfall of GetSwift. According to the Australian Financial Review, the report questioned how iSignThis met its revenue performance hurdles and claimed it had an "opaque" ownership structure.
For its part, iSignThis has vehemently denied any impropriety and has said repeatedly that it is considering its legal options against Ownership Matters. And key early investors, such as hedge fund LHC Capital, have continued to throw their support behind the embattled company.
In the midst of this, iSignThis has tried to reassure investors with positive news announcements. Last week it notified the market of the European Patent Office's intention to grant a patent on its payment authentication method across 38 countries, including all EU member states and Turkey.
This followed closely on the heels of an earlier announcement in which the company reported it had exceeded $1.1 billion of annualised gross processing turnover volume (GPTV) in August. This is the amount of money that iSignThis has processed on behalf of its merchants, from which it generates its fee revenue.
No wonder investors are confused and the share pricing is yo-yoing. On the one hand, accusations have been made against the company that could cause some serious reputational damage. But on the other, the good news growth story that underpinned its phenomenal share price rise is still marching on. GPTV is growing, and the company looks poised to gain a strong foothold in Europe.
It feels like investors are being challenged to pick a lane. And like many investment choices, it really comes down to your risk tolerance. Some investors may not mind a few bumps along the way, if it means the company still ultimately succeeds – after all, these sorts of temporary dips in the share price provide opportunities to buy-in at lower prices and benefit from dollar-cost averaging.
Other investors may understandably think this one is just too risky – they can't handle these sorts of wild fluctuations in the share price, and would rather bank on more mature and dependable growth stocks in the tech space like Altium Limited (ASX: ALU) or WiseTech Global Limited (ASX: WTC).
Ultimately, positive results will speak louder than words for iSignThis, and it will have to ensure it can get wary investors back onside in the coming months.
