The Tyro Payments Ltd (ASX: TYR) share price is up 7 per cent to $3.65 today after a $2.75 per share IPO that hit the ASX boards last Friday.
The fintech is chaired by ex-Telstra Corporation Ltd (ASX: TLS) CEO, David Thodey, who has trousered around 900,000 shares himself and helped the group raise around $250 million at IPO to boast a total market valuation of $1.364 billion.
What does Tyro do?
Tyro provides merchants mainly in the hospitality, health or retail spaces the EFTPOS or 'point of sale' machines to process customers' debit or credit card payments.
It has now signed up 29,000 merchants and reported a 'pro forma' EBITDA loss of of $6.1 million on income of $189.8 million over fiscal 2019. Total transaction value processed climbed 31% to $17.5 billion.
At the IPO around $175 million of the $300 million raised will be banked as a major payday for the company's founders, with around $125 million left over to be reinvested back into the business for growth.
Areas flagged for investment include; sales and marketing, product development, acquisitions, and "new industry verticals".
It reported that over fiscal 2019 nearly half of all new merchants acquired came about as a result of digital marketing. In other words it's likely to ramp up its investment in online (display) advertising, SEO optimisation, or data-driven e-commerce.
Tyro brings advantages to merchants as it's a little like a modern-day 'cash register' supporting small businesses as Australian consumers increasingly dump cash as a payment method.
The 'war on cash' is a structural shift Tyro should keep benefiting from.
However, it's in a competitive space with rivals like U.S. innovator Square Inc. taking significant market share in Australia.
This has not stopped investors bidding the shares 33 per cent higher over its first week on the market to now give it a market value around $1.875 billion.
That's around 10x trailing revenue as investors bet the group will scale sufficiently well to move towards profitability.
There's a lot of hype around the fintech payments space on the ASX right now largely thanks to the runaway success of Afterpay Group Ltd (ASX: APT). So while Tyro looks attractive, you wouldn't want to get carried away as an investor.
