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· Posted on
February 21, 2024

Humm's decided to tell everyone it's not profitable and uhhhh, you do you I guess?

The move was part of a plan to push through a scrip deal for the company.

What's the key learning?

  • Telling shareholders the company they've put money into is unprofitable is an extremely rare choice.
  • However, it this case it seems like it was necessary.

👉 Background: Humm used to be called Flexigroup, and was behind those white-label credit cards for retailers. It then re-branded to Humm with a focus on buy now pay later services.

👉 What happened: In Jan this year, Aussie financial services company Latitude Financial offered to buy Humm for $335 million. The deal would be split by $35 million in cash, and 150 million Latitude shares.

👉 What else: The deal needs shareholder approval, and Humm's biggest shareholder is fairly opposed to it. So, to gain support from other shareholders, Humm's directors came out and said the company's consumer finance arm isn't actually profitable... so a sale is the best option.

What's the key learning?

💡Telling shareholders that the company they've invested in is unprofitable is a very rare move. But it's also a testament to how tricky a scrip deal can be to sell to shareholders.

💡Recap: A scrip deal is where shares are offered partly or wholly in place of cash. In this case, shareholders in Humm are vulnerable to a fall in the price of Latitude.

💡Latitude's shares are down around 13% since the offer was made. On top of that, the whole BNPL industry has been struggling big time. So, we can see why Humm's had to hustle to get this deal across the line.

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