View Full Version : Squirrel - equity investment

Harvey Specter
16-03-2016, 08:59 AM
I thought I would start a new thread, as this is different to the debt investments through Squirrel Money.

The equity raise is currently at $1.8m (target of $5m) and is only open to customers (private offer) and wholesale investors. It would be interesting to see what the split for their current raise is as they have said they had $4m of interest in the private offer which they were hoping would convert into $2m of actual investment.

Minimum investment is $5k

I haven't done a link since it is a private offer and a wholesale offer so you need to be invited to both.

Harvey Specter
16-03-2016, 09:01 AM
Valuation is split it 2. $20m for mortgage business which is at a PE of 18 and about $3m for the P2P technology platform.

Mortgage business sounds high but the switch to trail fees could be very profitable. For the P2P platform, could be cheap if they could get enough going through it. Harmoney is valued at about $50-100m and is only about 1 year ahead of Squirrel.

Liquidation event is proposed NXT listing next year so money isn't locked up for too long if they actually go down that route.

16-03-2016, 10:44 AM
I am currently in two minds re this.

On the face of it it does look like a good investment, and from the funds rolling in so far it would seem other people agree.

However it is basically a tech stock ("fintech") that is growth focused that doesn't pay a dividend, something I wouldn't normally invest in.

Also with the business as a whole being so heaverly weighted to the Auckland housing market makes me nervous. I do note they are taking steps outside of Auckland + the P2P is expected to grow, albeit slowly.

16-03-2016, 10:54 AM

16-03-2016, 11:49 AM
I'm going to stay out this thread from now, as need to be careful around making sure communication goes to all investors / potential investors. If you want to throw some questions at me do it through the Snowball Q&A section.

@Harvey. I put an answer to your question on Snowball regarding the mortgage business. Even if we don't grow the business at all from current 2017 plan volumes the operating profit increases to $3.15m and the PE drops below 10. My view is that the PE on the 2016 and 2017 result is misleading because of the transition opportunity cost moving to trail commission model. That's why we showed the forward projected PE in the IM. You're right about the opportunity here.

On the P2P platform look at my background and think longer-term. Competitive advantage boils down to people, culture and processes. My view is that people are getting too caught up on the short-term. We're in for a long-term game.

@unhuman. I get the odd nerve about Auckland and that's a good thing. Remember we launched at the height of the GFC with no client base so our foundations were built in the toughest times. We know what its like. https://www.squirrel.co.nz/starting-business-squirrel-story/

Auckland is the key market and will continue to be. House prices are high but population growth will continue and people will continue to want to upgrade and move house and buy and build. In the IM we talk about broker moving from 33% share of market to 50% share of market consistent with Australian experience. That could be a 50% growth rate over the next say 5 years irrespective of what happens to the housing market. We believe there is still a big growth opportunity in Auckland, before we talk about the opportunity across the rest of the country.

We are well diversified with an Indian team, a Chinese team and we're strong in first home buyers and professionals (home owners and higher incomes.) We're underweight property investors. This diversity tends to smooth things out. We are piloting outside of Auckland in BOP but that will be a slow process and hard work.

Trail commission reduces the need to drive everything through upfront sales activity, and sales volumes have not been high regardless. P2P income also diversifies us and we continue to look at other financial services products.

Technology will play a greater role in what we are doing and reduce the risk around labour costs. We are not running a traditional broker model with the team on base salaries allowing us to retain more revenue and invest in marketing and building the brand.

If there was a market correction, then provided we are ready for it, it will come at a short term cost but could be a big opportunity for Squirrel. Great businesses are built in the hard times.