Transaction Capital’s stock price dropped drastically last week after the company released a disappointing trading statement and announced the departure of CEO David Hurwitz.
Transaction Capital reported lower profitability due to its ongoing reorganisation of its SA Taxi business. Revenue for WeBuyCars will drop drastically.
The management team at Transaction Capital anticipates even lower core, headline, and basic profits per share than they forecasted back in March.
The company’s net profits would be at least 152% lower than in the fiscal year 2022 at this rate. The minimum net loss that shareholders may count on is R648 million.
The report also revealed that Nutun’s profits would grow at a slower rate than anticipated and that WeBuyCars’ profits would fall by 20% from 2022. More than 99% of Transaction Capital’s net income in 2022 came from SA Taxi, WeBuyCars, and Nutun.
The announcement caused a 40% drop in the Transaction Capital share price, which went from R7.00 to roughly R4.00. Armitage claims the stock has been oversold despite the problems plaguing SA Taxi and WeBuyCars.
About Transaction Capital
Transaction Capital Limited is an investment holding company located in South Africa that identifies and invests in alternative asset types. The company finds, invests in, and runs a diverse portfolio of high-potential enterprises. Its section includes SA Taxi, Gomo, and Nutun.
A Taxi is a vertically integrated taxi platform that combines vehicle procurement, retail, repossession, and refurbishing with asset-backed developmental finance and insurance capabilities for certain vehicle types. SA Taxi provides Value-Added Services (Road Coverage).
The Gomo section assists in the formation of instalment sales and rental agreements with persons seeking to finance the purchase of vehicles from WeBuyCars or pay for the usage of vehicles.
The Nutun segment provides an enhanced range of digital customer services that includes capital-enabled services (CE services) as well as capital-light customer experience management services (CX services).
Transaction Capital: share performance and investor profile
Institutional investors will be relieved to see last week’s 15% rise in the Transaction Capital share price after a year in which returns were down 82%.
The performance of institutional investors is sometimes measured against that of a widely watched index. As a result, they often think of purchasing shares of the larger companies found in the corresponding benchmark index.
Institutional investors do exist for Transaction Capital, and they own a sizable chunk of the company. This indicates that there is some trust amongst institutional investors.
There is always the possibility of being in a ‘crowded trade’ when many institutions hold the same stock. In the event of a botched trade, several parties may rush to unload their shares. A corporation without a track record of expansion is more vulnerable to this danger.
The announcement caused a 40% drop in Transaction Capital’s share price, which went from R7.00 to roughly R4.00.
Armitage claims the stock has been oversold despite the problems plaguing SA Taxi and WeBuyCars. According to Armitage, investors aren’t willing to “play the risk game” and would rather sell their shares now than wait for the company to improve.
The share price hovers around R4.00 at the moment. Armitage continued by saying that Transaction Capital’s management is top-notch and has the ability to make deals that will turn the company around.
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