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The People’s Operator (TPOP)
Share Price: 9.25p
Shares in Issue: 122m
Market Cap: 11m
The People’s Operator, describes itself as cause-based commercial mobile virtual network operator.
Essentially it supplies SIM cards for mobile phones and is the only mobile phone network provider that gives 10% of your monthly spend (at no extra cost to you) to the charity of your choice.
It operates in the UK and the US using the networks of Three, Sprint and T-Mobile
The company floated at 130p in December of 2014, right now the current share prices is 9.25p.
So why the fall in value?
TPO was launched on 19 November 2012 by its three co-founders, Andrew Rosenfeld, Tom Gutteridge and Mark Epstein. In January of 2014, Jimmy Wales, founder of Wikipedia, joined the board after Andrew explained the proposition to him.
Jimmy is quoted as saying, “TPO has huge potential for viral growth and the more it grows, the more money will pass to the people and communities that need it.”
To cut a long story short, due to several issues, namely the passing of, co-founder, Andrew Rosenfeld in February of 2014, technical issues with it transition from 3G to 4G in the US and very high cash burn, the company’s share price recently went as low as 2.5p.
Are the Issues Sorted?
From a fundamental perspective, it seems as though they are.
They appear to be having none of the previous issues with the delivery of it’s service to new customers, they recently stated that cash burn is reducing and revenue is growing (you can listen to the podcast with CEO below).
5 Reasons to put The People’s Operator #TPOP on your Watchlist
Mark Epstein said, on the podcast, that revenue per month, is currently growing at above a single digit % rate. They also stated in an their interim results on 30th September RNS, that cash burn would be down to £115k per month by January 2017.
I have created a spreadsheet to determine what I expect profit to be for for 2017 based on revenue and cash burn at various levels and I’ve come up with the following summary:
Based on revenue growing 10% per month with cash burn at £150k per month, the market cap could be around:
£46m with a price earnings ratio of 10.
£69m with a price earnings ratio of 15.
Even if I half that revenue growth to 5% per month with cash burn at £150k per month, the market cap could be:
£29m with a price earnings ratio of 10.
£44m with a price earnings ratio of 15.
There current market capitalisation is £11m.
25th January 2016 – Trading Update
“The Company is pleased to report that the overall trading performance for the 12 months ended 31 December 2016 is expected to be in line with expectations and management is encouraged by the promising growth in SIM orders in the US over the Christmas period. Group revenue for the 12 months ended 31 December 2016 is currently expected to be approximately £3.6m.”
They currently have no need to raise more cash as you can see below:
25th January 2016
They raised £200,000 at 5p per share.
17th January 2016
They raised £1.7m at 5p per share.
31 October 2016
The Company had £2.0 million of cash, which includes £1.0 million that has been drawn down from Barclays pursuant to the Company’s debt facilities.
The mobile phone market continues to grow and there’s no signs it will slow down.
Of all digital media use, consumers in the US spend 51% of their time on their mobiles, which is significantly above the 42% of the time they spend on their desktop computers. This time spent is also 7 times more than it was 5 years ago.
What’s important to realise is that this busines is currently only in the UK and the US. Even though the company seem to be getting traction in the US, Mark stated that the business model is easily scalable and mobile use in emerging markets, is even more pronounced than in developed countries.
Around 60% of the shares are held held by major shareholders, as you can see from above.
One thing worth noting is that James and Matthew Rosenfeld (sons of, co-founder, Andrew who passed away in 2014) are no longer involved in the business and are therefore sellers of their shares. This maybe provide short term downward pressure on the share price. It may also provide an opportunity to pick up the shares at a lower level.
Also worth noting that their mother-in-law Juliet Rosenfeld, is an active Non-Executive Director and recently subscribed for 15,500,000 shares in the December fundraise at 5p.
Mark Epstein, Chief Executive Officer
Prior to TPO, Mark co-founded and ran Mass1 Limited, where he built the business into a leading UK campaign agency, working with organisations including Channel 4, and charities such as DEC (Disasters Emergency Committee).
Before starting Mass1 Mark held senior management positions in the mobile and creative industries.
He is a board member of the Wikimedia Foundation a non-profit charitable organization. Jimmy holds a degree in Finance from Auburn University and a Masters in finance from the University of Alabama.
Michael Butler, currently Non-Executive Director but to become Chairman
Mr Butler has held various senior roles in general management, sales and marketing in telecommunications businesses, including as President and Chief Operating Officer and an executive board director of Inmarsat plc.
He was previously Managing Director of MCI Worldcom UK. He is currently a director of several other companies, including Non-Executive Chairman of Broadband Satellite Services Limited, and is a Non-Executive Director of Synectics PLC, an AIM-listed provider of integrated security & surveillance systems.
It is intended that following the next Annual General Meeting of the Company Mr Butler will be appointed as Non-Executive Chairman
The Peoples Operator have a unique offering amongst mobile service providers.
At no extra expense to the consumer, they donate 10% of their revenue towards charitable causes and their offering is still competitive with other mobile phone service providers.
I’m sure given the chance, most people would opt, not only for the flexibility of a rolling monthly contract but have some of the money they spend go to a worthy cause, if it comes at no extra cost.
I believe this has massive viral potential and it’s one of the reasons Jimmy Wales got involved. Jimmy, as Mark explains on the podcast, has the connections to open up so many doors on the marketing side of the business.
When they first lauched in the US he was invited to talk about TPOP on all the big American shows. Not many people possess this ability, to attract this amount of media attention.
The charity offering also mean big charities are happy to market the brand knowing full well they will get a return on it.
They were featured in the weekend edition of the Financial Times and they also just achieved the top spot on our, “Most Followed Companie’s”, on Vox Markets in the last 24 hours.
The Peoples Operator has had it fair share if issues, since floating in 2014 and the share price has reacted accordingly.
These issues are seemingly behind them, revenue is growing impressively and they’re actively focused on reducing their cash burn. This dynamic should hopefully see them making good progress towards profitability in 2017.
If this is the case then I’d expect TPOP to be one of the best recovery plays on AIM in 2017.
You can hear my interview with Mark Epstein, CEO of The People’s Operator below.
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The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.