There have been several pieces of significant news this week from Ackroo (AKR.V), one of which, in my opinion, is game-changing and elevates Ackroo to a whole new level within the loyalty and gift card market. The closure of the private placement and the announcement of Ackroo's partnership with First Data, the largest POS provider in the USA and one of the largest in the world, sets the stage for significant organic growth ahead that will fuel the company quickly to profitability and positive cash flow, thus allowing for acquisition opportunities to be acted upon later in 2016.
Let's examine each of these developments and their potential impacts to Ackroo:
1. Closure of the Private Placement
On March 17, 2016, Ackroo announced a private placement seeking to raise up to $2M. On May 10, 2016, Ackroo announced that it had re-negotiated its terms with Dealer Rewards Canada ("DRC"). Under the former terms of the acquisition Ackroo was required to complete payments totaling $1,130,000 prior to January 2017. The re-negotiated terms extended those terms to January 2019 with Ackroo agreeing to pay DRC $330,000 on or before July 1st, 2016, in addition to twenty-four monthly payments of $36,916 commencing in January 2017. In effect, this significantly reduced the capital requirements of the company (remember, Ackroo was paying over $100k+ per month to DRC for this unsecured payout which was eating up cash flow) and thus Ackroo announced it was not seeking to raise the full $2M from the private placement announced in March.
On June 9th 2016 , Ackroo announced it closed the private placement with $587,316 of new capital. This capital will be sufficient to fund the company's near-term organic growth opportunities and the upcoming July payment to DRC. There will likely need to be another private placement in a few months to provide the ammunition for greater organic scale and an accretive acquisition or two.
Ackroo was able to raise nearly $600k with the market price mostly below the PP price of .20/share since the announcement of the equity raise, and without any warrants attached to the deal. Very positive!
Ackroo is now re-capitalized and closer than ever to profitability and positive cash flow!
2. Partnership with First Data
On June 8, 2016, Ackroo announced a new partnership with First Data. This is a HUGE WIN, and a very strategic move for Ackroo for many reasons as First Data owns about 55% of the US payment processing market, and has more merchant locations in the world than any other payment processor! While the announced partnership is with First Data's Canadian division, solid exceution by the Ackroo team could lead to a quick entrance into First Data's US merchant partners.
Here are the reasons that I believe this deal is extremely lucrative and validating for Ackroo:
- Opens up 6M merchant locations to Ackroo globally (initially 30k in Canada and quickly growing, 4M in USA). This is compared to the 250k potential merchant locations that Ackroo has now through its current Canadian POS partners like Chase Paymentech and Global Payments. Wow!
- Validates Ackroo’s technology and scalability as First Data did many months of due diligence before selecting Ackroo as its partner in this area.
- There will be 100+ Sales Reps of First Data that will now “work” with Ackroo, selling it’s products into First Data’s current and prospective merchant locations. All of this without Ackroo’s expenses/overhead increasing a penny.
- As a result of this partnership, adding a 3rd major partner could potentially increase organic growth by more than 33% if not higher. This is just an assumption on my end as I have no way of validating this yet however I wouldn’t be surprised if we see nice additional organic lift start to happen as early as Q3 2016.
It is quite unheard of for a company with a $12B market cap to select a partner like Ackroo with a mere $3M market cap. This speaks volume about Ackroo as a company, their technology and scalability, and First Data's belief and confidence in Steve Levely, Ackroo CEO.
The above two events indicate a significant inflection point for Ackroo that should allow the company's growth to begin accelerating, thus allowing for the potential of significant shareholder returns.