LON:TRMR | Taptica - True Contrarian Or Potential Disaster? | David Cheong

21st Jan '19 by David Cheong

29 comments 4740 reads

Wanted to get the wider communities thoughts on Taptica , especially regarding their latest Buy back plans, suspension of the buyback, supposed acquisition targets and its declining stock price despite its great Quality and Value StockRanks.

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About the Author

David Cheong

Premium Member

29 comments

mojomogoz

21st Jan '19

No-one wants to talk about Taptica International (LON:TAP)

I don't know where the bottom is as Taptica has chosen exactly the wrong time to wig out investors. But it would take something fairly spectacular to mean that the shares are bad value at 140p....where I have just filled my boots as there's obviously still keen sellers. There's a lack of evidence that there is a spectacular bad going down beyond the bad noise that is now public.

I'm not a great fan of this area or Israeli listed companies. Israeli tech is brilliant...very dynamic and driven...but its also a bit wild west. Having been in the tech startup area in the past my view is that the best tech startups are run by cowboys and chancers. Got be super smart though too and have a good idea and then a willingness to move quick and junk what you thought was good.

My biggest negative on Taptica is the loss of old CEO Hagai Tal! The guy seemed to be the biz. The legal case against him looks like the rough and tumble of buying and selling tech companies and the litigants seem to me like they didn't do their homework properly and then got caught....and the sellers obviously stretched reality to stretch the price. My experience with payment processors is that these are always very tough interactions unless you are a large or very established business. Relationships are unstable. There's a lot of messing around from the background infrastructure providers and the big financial institutions (banks, Visa, etc) to try and control and contain the space. There's a lot of reg arb going on to avoid regs or the clownish to malevolent interpretation of regs by mainstream operators. I created an entirely reg arb structure (for legitimate reasons as I my startup was being allowed to go through conventional routes) spending massive time on the exercise...only to be torpedoed by cost killer sidewinder from mainstream financial inst seeking to soak me. Its a nightmare...I'd be super cautious of investing in any payment business. Its a dirty space and hard to know what's going on.

Overall, I hope that Tal remains close to the company to share his wisdom...don't know the guy at all but it just seems obvious that he has been good.

I'm pleased the have hung up the share buyback to focus on an acquisition. Taptica have been brilliant at generating value from acquisitions. Obviously the messaging around this has been a disaster...thank you from a price perspective.

Then there's the data privacy stuff and illegitimate acquisition of data issues that have hit Facebook and Cambridge Analytica and this sentiment has rolled over onto Taptica. They say it has no impact as they are not storing personal data. There may be some residual issues from this and knock on expenses but its not enough to justify price right now.

I suspect the interim CEO has also caused angst. She's young and come from internally. However, she's obvs very capable to progress to where she has and given the fast paced innovation of the company and rapid entry into new markets its best that the promote the best candidate from internally...particularly as they are mid acquisition mojo.

Real cash production has been good. The earning do not appear fabricated.

There's some anxiety around the size of receivables and payables in the last 18 months since they acquired Tremor Video. Evidence is that they are working through that and bringing it down by being more astute and aggressive in managing terms. Maybe some writedowns can come from it but the value can take it.

So....I bought a full position. I thought about being cute and slicing in over time seeking to average down but this stock is so news driven and the value so good today I decided the best course of action is just to buy. Close my eyes time. In the vacuum could easily be down 30% by the end of the week.

I don't really know if there is great growth potential from here for Taptica International (LON:TAP). It seems there should be but its a brutal business area and maybe new leadership wont he as hardcore as Tal.

I wouldn't buy this share as a fully priced growth company as growth trajectory is hard to see. I looked after it IPO'd as Marimedia and fell in subsequent year plus. It seemed potentially great value but I couldn't assess the execution potential...well the the execution has been spectacular the price has collapsed for angsty reasons discussion above. It seems likely to be a gift from the market.

DYOR obvs (and leave me to cry alone if I'm terribly wrong)

mmarkkj777

21st Jan '19

Mojo,

Very brave. I have been watching it. I also think it will bounce back, but don't know when.

I may buy a small pilot stake soon.

mojomogoz

21st Jan '19

I fear being a fool about this...but I've done that before and can wear it.

I decided to override my cautious be moderate thoughts and just swing in. I think its close to no-brainer unless there's a fraud or illegal business model....obviously this could be the case partly as result of operating in a wild west area but the odds look highly against it...it looks like a business that has worked and reading reviews on it from employees seem to justify that. Some ex employees hate it but its a hardcore place and if you don't cut it they seem like they cut you. Not the way to run may businesses....but its right in this area.

AnonymousUser252054

21st Jan '19

As a contrarian, I bought a tiny wedge of Taptica International (LON:TAP) last week.

Yesterday was spent reading the 154 page judgement against former CEO Hagai Tal. (Court judgments often make terrific reading.) I also started making notes from other sources but mostly lifting paragraphs from the judgment, (and then duplicating some during a second reading). So, for what it's worth, here's my haphazard and over-long notes-to-self. I'd recommend reading the full judgment instead, it's massively informative. Promotional videos of Plimus and Bluesnap are out there and are worth a look. I've read Tal being described as a 'crook' online after the fraud finding. I disagree with that cut and dried interpretation, but clearly his reputation is wrecked, and he is likely to be financially ruined.

I have no idea if Taptica International (LON:TAP) is a good investment or not but having read the whole story I'm minded to think Tal is OK and hope he survives this.

From Admission document, 2014:

Hagai Tal is a co-defendant in a claim arising out of the acquisition by Great Hill Equity Partners of Plimus Inc, a company of which Mr Tal was, prior to its sale, the chief executive officer and a minority shareholder. All the defendants to the claim (including Mr Tal) deny 32 any wrongdoing and intend to vigorously defend themselves against it. However, there can be no guarantee that, should the claim proceed to trial, their defence would be successful. Any judgment against Mr Tal could have an adverse effect on the Company, its reputation and its relationships with its customers.

In its complaint (as amended) Great Hill alleges that the Defendants deliberately and fraudulently concealed material facts regarding Plimus's relationships with its payment processors and its compliance with various credit card regulations and seek judgment either that the transaction be rescinded and the US$115 million consideration be returned to Great Hill together with interest, or that damages and costs be assessed and awarded by the court. The Defendants deny any liability and intend to vigorously defend themselves against the claim. However, there can be no guarantee that, should the claim proceed to trial, their defence would be successful. Any judgment against Mr Tal could have an adverse effect on the Company, its reputation and its relationships with its customers.

Six year case over payments solution, Plimus, now trading as bluesnap, owned by Great Hill, the company suing the vendors: https://www.greathillpartners....

https://home.bluesnap.com/

BlueSnap which was recently named Best eCommerce Platform/Gateway at the 2018 CNP Expo and the Best 30 Companies of the Year by CIO Bulletin

https://www.businesswire.com/n...

Plimus issues were to do with bad vendors (the self-onboarded micro businesses) resulting in high chargebacks which the card companies (incl Paypal) monitored and issued fines. The relationships could be terminated.

Below are lifts from the Judge's finding and the 'I' is the judge expressing his view.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
https://www.lexology.com/libra...

Great Hill was confident that the growth of both new sellers and the growth of an existing seller, Wix, would mean that Plimus could still achieve Great Hill’s original financial projections for the fourth quarter of 2011, which was the basis for its purchase price.

Plimus was actively seeking more enterprise/large business clients like Wix, a process that required dedicated sale staff, unlike its “long-tail” vendors that onboarded themselves.

Tal was integral to Great Hill’s acquisition of Plimus, as Great Hill was, in effect, buying into Tal’s vision of the company.

Tal agreed to roll over fifty percent of his merger proceeds, as originally envisioned in the Letter of Intent. In fact, Tal put more than fifty percent of his merger proceeds into the new company; he left an additional portion of his merger proceeds in Plimus as a secured promissory note, although this was primarily for tax purposes.

Great Hill was particularly focused on Wix, the vendor that was projected to constitute a substantial portion of Plimus’s future transaction volume. Wix, however, was not ramping as expected, and as a result, Great Hill reduced projections for Plimus’s transaction volume and EBITDA projections for the fourth quarter of 2011. On September 15, Cayer sent Great Hill’s latest Plimus projections to Tal, which reflected lower EBITDA projections in the near term compared to what had been presented to Great Hill partners in the due diligence memo.

the merger did not close until September 29, 2011.

In one instance in late September, PayPal reviewed a list of Plimus vendors and recommended that certain vendor categories be “shut down if [Plimus] want[ed] to keep [their] relationship with [PayPal].” I find that at the time of closing, Tal and Itshayek did not believe PayPal would terminate Plimus’s PayPal Pro account, and believed that Plimus’s chargeback ratio for MasterCard would not exceed one percent for September.

(It is disputed whether Tal and GH discussed this:)

I find neither Tal nor Busby’s accounts credible. It is not credible that Tal told Busby that PayPal, Plimus’s principal account, threatened termination and that Busby did nothing to alert the rest of the Great Hill deal team or Great Hill’s deal counsel. Busby’s testimony also lacks credibility. Specifically, I find it unlikely that in the course of a discussion limited to adding processors, Busby demanded an assurance from Tal that Plimus would maintain its PayPal relationship, despite the fact that (per Busby) he had no reason to suspect that the Plimus-PayPal relationship was in doubt. Furthermore, as discussed below, Busby’s muted response when he ultimately learned that PayPal had terminated Plimus suggests that Busby already knew there was, at least, some issue with the PayPal relationship.

The lack of a complete disclosure also fits with Tal’s own misplaced confidence at that time that PayPal would not, in fact, terminate its relationship with Plimus.

Tal spoke with Itshayek in advance of the bring down call, and they identified three business issues responsive to Klahr’s list of questions: (1) a potential fine related to GoClickCash, (2) PayPal’s termination threats, and (3) the recent request from PayPal for information on Home Wealth Solutions.458 Tal and Itshayek determined that Itshayek, who would be participating in the call, should bring up only the request for information on Home Wealth Solutions.459 They agreed that Itshayek should not bring up the PayPal threats or the potential fine for GoClickCash because Plimus had not yet received formal notices for either

Tal and Itshayek did not raise PayPal Pro excessive chargebacks, the GoClickCash fine, or PayPal’s threats of termination to the Plimus Board of Directors.

The merger was funded by approximately $90 million in cash from Great Hill, $23 million in debt financing from Madison Capital Funding LLC, and $3 million in equity that Tal rolled over. As envisioned in the Merger Agreement, $9.2 million was deposited in an escrow account, where it remains today.

Tal received $5,274,775 in merger proceeds; $478,656 is held in escrow, $3,000,000 was rolled over, and $678,505 was left with Plimus in the form of a promissory note. In this context, “merger proceeds” does not include the payments Tal received from his side letter agreements ($2m - for clarification.)

(sellers) SIG Fund received $49,908,911 in merger proceeds, $3,323,060 is held in escrow.506 Herzog and Kleinberg both received $21,170,686 in merger proceeds, and $1,972,611 of each of their respective merger proceeds is held in escrow. (Two charities) Kids Connect received $2,201,317 in merger proceeds, $146,569 of which is held in escrow, and Donors Capital received $8,482,419 in merger proceeds, $605,068 of which is held in escrow.

PayPal notified Plimus on September 30, 2011 (the next day after the merger) that the fine related to GoClickCash would appear on its processor statement as “MasterCard Violation-July 2011.” 510 Plimus asked for more detail on October 6, and PayPal, for the first time,511 told Plimus that the underlying violation was a BRAM (or “Business Risk Assessment and Mitigation”) violation, which are considered severe violations.

Plimus’s PayPal Pro chargeback ratio for MasterCard in September 2011 did not exceed one percent. Nonetheless, on October 7, 2011, PayPal sent Plimus a notice of termination, thereby ending its relationship as Plimus’s largest processor.

I find that Tal did disclose some level of problem with PayPal to Busby in Israel, which would explain Busby’s muted response. In other words, before Tal’s e-mail, Busby was aware that PayPal’s relationship with Plimus was troubled, but was unaware of PayPal’s threats to terminate because Tal had withheld those threats from Great Hill.

The loss of PayPal as a processor and the temporary loss of PayPal wallet as a payment method affected Plimus’s ability to do business. It also hurt Plimus’s reputation, as it followed on the heels of the loss of Paymentech. Additionally, PayPal placed Plimus on the MATCH list on November 14, 2011, with reason code “Excessive Chargebacks.”

Plimus took corrective action following the processor terminations, including a January 2012 Plimus purge of approximately 500 vendors in “higher-risk merchant categories (auction/bid, forex software, media download, and virtual currency) and stopped accepting new merchants in these categories.” In the summary, Great Hill noted that Plimus also changed its onboarding process, which added more review before new vendors could begin processing transactions. Great Hill wrote that “the impact of these events and the decision to remove the higher-risk customers resulted in a decline in processing volume in December versus expectations, and we anticipate lower volumes into 2012.”

Tal was fired as CEO in August 2012. Great Hill filed this action on September 27, 2012, two days before the funds held in escrow were scheduled to be released. Additionally, SGE has not yet paid Tal the SGE Earn-Out.

In 2014, Plimus largely abandoned the reseller model and was instead forced to operate as a payment facilitator. Processors and acquiring banks preferred the payment facilitator model, which, compared to the reseller model, mandated much greater transparency on the identity of Plimus’s vendors.

The Complaint in this action was filed on September 27, 2012.

Paymentech was worried specifically about the risk of cross-border transactions in India, where it did not have a license to process such transactions. Therefore, Paymentech did have an incentive to end the relationship when it did, and the description of the end of the relationship as “mutual” is a false representation.

The Defendants have shown that Plimus had long been unhappy with Paymentech’s service and rates, and when Paymentech stopped supporting transactions outside the US, Canada, and the European Union, Plimus made a decision not to renew the relationship when it expired later in the year. All of this was disclosed to Great Hill. Furthermore, as described above, there was no attempt to conceal the Paymentech correspondence...

I find that there was no active concealment by the Fraud Defendants. Nonetheless, the representation that the end of the Paymentech relationship was “mutual” was false.

I turn next to the Plaintiffs’ argument that Tal, Itshayek, Goldman, and Klahr had knowledge that the representation in the legal disclosure was false. Tal clearly had such knowledge, because he authored the legal disclosure and was intimately familiar with the Paymentech termination. Furthermore, his comment, when approving the release of the Paymentech termination letters, that he “need[ed] to think about ways to communicate this,” foreshadows the disclosure he then crafted as an attempt to spin the termination in a misleadingly positive light.

Tal, Goldman, and Klahr had knowledge of the false representation describing the Paymentech termination as “mutual.”

The Fraud Defendants ultimately had confidence in Plimus’s viability and profitability. Nonetheless, it is clear that the Fraud Defendants believed the deal with Great Hill was advantageous to them, and wished it to close. Tal wanted liquidity and new investors with the capital to support rollups going forward;

However, a description of the termination as “mutual” was untrue and constitutes a false representation. It is also too far from the truth to be accidental; rather, it is an attempt to frame the end of the relationship in a misleading way and to have Great Hill rely on that framing.

The real point of friction 106 between Plimus and Paymentech was the cross-border transactions in India, which Paymentech refused to continue supporting, and which Plimus refused to stop transacting. The legal disclosure identified the cross-border issue as the main reason for the end of the Paymentech termination. Tal and Itshayek truthfully disclosed this information to Great Hill and its representatives during on-site diligence, in addition to disclosing truthfully the other reasons Plimus had to be dissatisfied with the relationship.

Great Hill, therefore, knew before closing that Plimus had previously had a disadvantageous contract with Paymentech, that Paymentech had decided to stop supporting certain cross-border transactions, and that as a result of that decision the Plimus-Paymentech relationship ended.

The relationship between Paymentech and Plimus became unworkable for both parties and ended before Great Hill offered to buy Plimus. Paymentech was no longer available to Plimus to process transactions as part of Plimus’s business. This information was material, and was accurately and timely disclosed to Great Hill. What was concealed by the misleading disclosure was that Paymentech initiated the termination. In the context of this case, that fact was not material, notwithstanding the Plaintiffs’ assertions to the contrary. The additional fact that Paymentech had an incentive to end the relationship before it came to a natural close does not materially add to the information that Great Hill had regarding this relationship. The crossborder transaction dispute that ended the relationship was known to Great Hill.

The Plaintiffs seek to establish the materiality of the concealed information by puffing up the importance of Paymentech to Plimus. Paymentech was Plimus’s largest supplier, but it supplied commodity processing services, which could be (and were) easily replaced at the time.

While the accelerated termination posed a “challenge” for Plimus, it was a temporal technical challenge of transitioning to new processors in a short period of time. Tal correctly downplayed the seriousness of the loss of Paymentech to the Plimus Board of Directors given Plimus’s other processing relationships. Fundamentally, moreover, the importance of Paymentech to Plimus is irrelevant to the materiality of the fact that Paymentech unilaterally discharged Plimus, given Great Hill’s accurate understanding as of the time of the transaction. I find, therefore, that the Fraud Defendants’ misrepresentations regarding Paymentech cannot support liability for fraud.

2011 vendor termination started with a PayPal notice on one vendor, GoClickCash, and that Plimus then identified sixteen similar vendors and terminated them also. While Plimus may have felt that the sixteen similar vendors would cause problems with PayPal in light of PayPal’s initial notice, it was still Plimus who identified the sixteen problematic vendors, and Plimus who decided to terminate the additional vendors based on the assessment of the risk imposed on Plimus.

Great Hill’s own diligence disclosed the limited extent to which Plimus could be said to have a “robust” or “proactive” risk monitoring system. Furthermore, Great Hill was aware that Plimus engaged in sporadic large-scale purges of vendors, as opposed to continuous small-scale terminations consistent with proactive risk monitoring.

I next turn to Plimus’s failure to provide Great Hill with documentation concerning excessive chargebacks. Paymentech’s (and later PayPal’s) notices regarding chargebacks and other violations were provided to Plimus, accompanied by varying levels of detail as to the nature and consequences of the chargebacks. These documents were requested by Great Hill as part of its diligence, but were not turned over to Great Hill; Itshayek testified as much at trial. Furthermore, despite Tal and Itshayek possessing these notices, Plimus’s June 18, 2011 and June 25, 2011 responses to Great Hill’s diligence request implied that no such notices existed.

Furthermore, it was false for Plimus to represent in diligence responses that no communications from Paymentech or PayPal regarding violations existed when, in fact, they did.

Furthermore, the representation that Plimus had no such notices was reiterated with each update to Plimus’s response to Great Hill’s due diligence request—responses that were reviewed or drafted, in pertinent part, by Tal and Itshayek. This belies innocent mistake.

Great Hill had reason to not be overly concerned with chargebacks, as they had asked for and received an indemnity provision in the merger agreement specifically for fines for excessive chargebacks related to pre-closing issues.

As a result, the Plaintiffs have not proven fraud against Tal and Itshayek in relation to Plimus’s history of violations.

A BRAM violation, as described in more detail infra, is considered by processors and the credit card associations to be among the most serious of violations. In terms of the alleged BRAM violation in connection with GoClickCash, Plimus was not informed that PayPal considered Plimus’s facilitation of GoClickCash transactions to be a BRAM violation until after closing. The Fraud Defendants could not misrepresent or hide something of which they were unaware, pre-closing.

The Plaintiffs also contend that the Defendants made representations about the growth of the company, the visibility of financial performance, and the quality of vendors. To the extent that these statements were projections or expectations, there was no reliance.607 Furthermore, the Plaintiffs have not made serious claims

that any such projections were not made in good faith. With respect to vendor quality, the Plaintiffs appear to contend that Plimus concealed or misrepresented the fact that many of its vendors’ businesses were of questionable validity. Great Hill, however, knew before the transaction that the vast majority of Plimus’s vendors were “long-tail” vendors, and that there was frequent churn of these vendors.

At issue here, then, are the alleged failure to disclose that PayPal was fining Plimus related to GoClickCash and the failure to disclose that PayPal was threatening to terminate its relationship with Plimus.

Tal testified that he disclosed the GoClickCash fine in a phone call with Busby only a few days prior to closing. To recap, I found this assertion was not credible because the supplemental disclosure schedule contained no reference to

GoClickCash.611 Additionally, I found that Tal disclosed some level of problems with PayPal to Busby in Israel, but that this disclosure did not include PayPal’s credible threats of termination. The failure to disclose the fine and the termination threats are false representations. Tal had a duty to disclose them to Great Hill, and to the extent they were not included in representations made in the Merger Agreement, those representations are also false.

Only Tal had actual knowledge of the falsity.

Tal and Itshayek spoke before this call and agreed not to disclose the possibility of a GoClickCash fine or the PayPal termination threats. Tal told Itshayek that he would personally disclose these issues to Great Hill. Given Tal’s assurance, Itshayek had no reason to believe that, to the contrary, these facts would be withheld from Great Hill. For this reason, Itshayek cannot be charged with knowledge that Tal ultimately did not make the necessary disclosures.

Goldman and Klahr had no knowledge of the parlous state of Plimus’s relationship with PayPal.

Great Hill’s reliance on these false representations was actual and justified. PayPal’s termination threats were material information. PayPal Pro was a commodity processing service, similar to Paymentech. However the loss of Paymentech was disclosed, only certain details, which I found not material, were concealed. I find, by contrast, the possibility of losing a second major processor in a matter of few months to be material to a prospective buyer. Furthermore, unlike with Paymentech, Plimus was not ambivalent to the PayPal relationship, and the loss of PayPal would mean a major disruption to Plimus’s business. And Tal knew that the grounds raised by PayPal—excessive chargebacks—were an ongoing problem for Plimus. 6

The findings above are sufficient to a finding of liability against Tal for fraud/fraudulent inducement. While damages are an element of fraud, the quantum of damages here awaits further litigation.

Tal was set to continue as CEO of Plimus after the merger. As I have

previously alluded, I am not persuaded by the Plaintiffs’ arguments that Tal lacked

faith in the business. However, Tal wanted the merger to go forward, as it had

advantages for him personally—he could become CEO of a better-capitalized

company and would personally benefit from the earn-outs and the liquidity that he

would realize from the sale. Tal testified that, despite its threats, he thought PayPal

would not terminate Plimus. He believed that he could resolve the issues between

PayPal and Plimus post-closing. I believe that testimony.

The Plaintiffs argue

specifically that Plimus’s revenue and profits, as represented in the disclosure

schedule attached to the Merger Agreement, were inflated because they included vendors that were later terminated and did not reflect the loss of PayPal. Given that

these vendors “had to be terminated after Plimus’s repeated violations of the Card

Network rules lest the company lose every payment processor,” I assume the

Plaintiffs are referring to the five hundred vendors that Plimus terminated in January

2012, post-merger.

I note at the outset that characterizing the loss of PayPal as breaching a duty

to disclose “liabilities or obligations” is a strained interpretation of Plimus’s

contractual duties. At the time of closing, PayPal had threatened to terminate its

relationship with Plimus, but had yet to make a definitive decision; furthermore, Tal

did not believe that PayPal would actually terminate. Fundamentally, there was no

known or unknown material liability related to the loss of PayPal at the time of

closing.

Similarly, the post-closing termination of five hundred vendors in January of

2012, four months after closing, was not a material liability that existed at the time

of closing.

According to the representative, Plimus should “shut down [these

vendors] if [Plimus] want[ed] to keep [its] relationship with [PayPal].”629 The

categories identified did include several categories of vendors that Plimus later

terminated in January 2012. However, the fact that these categories should be shut

down to “keep” PayPal suggests that PayPal was not lost as of September 26, 2011,

only three days before closing. Moreover, while Plimus ultimately terminated these

categories in January 2012, it did so not to keep PayPal, but in an effort to regain

PayPal. Plimus’s efforts to recoup PayPal, in any event, cannot be considered a

material liability at the time of closing, when Plimus had yet to even lose PayPal.

e PayPal’s internal communications showed that a definitive decision

regarding termination was not made prior to closing. Plimus, however, was aware

of the PayPal representatives’ declarative statements that PayPal would send a

termination notice once certain conditions were met. Section 3.26(b)’s plain

language does not require a notification of termination; only a notification of an

intent to terminate. PayPal representatives expressed such an intent to terminate in

e-mails and calls to Plimus in August and September 2011. As a result, the

Indemnification Defendants have breached Section 3.26(b).

Because I have found above that Tal committed fraud when he did not disclose PayPal’s termination threat, I must now grapple with the Exclusive Remedy clause.

I find that the Plaintiffs have shown that Tal is liable

for fraud, and that the Plaintiffs are entitled to restitution for breaches of certain

representations and warranties, in an amount capped by the funds in escrow. Issues

of damages remain to be tried.

The Court rejected all of Great Hill’s fraud claims, with one exception. The Court concluded that Plimus’s then CEO knowingly failed to disclose the Processor B related fine and a threat by Processor B to terminate its relationship with Plimus, although the Court also determined that Great Hill in fact knew that there was “at least some issue with” the Processor B relationship despite its position to the contrary.

Plimus, 2012 promotional video:

mojomogoz

22nd Jan '19

shine66

Wow! Thanks for posting this short novel ;)

Tal did wrong. However, I stick with comment that Great Hill are fools. It is evident that they did not understand the area they were investing in nor the specifics of Plimus's business. Frankly, this is pretty common in the venture investment world particularly in hi-tech and/or "innovative" financial businesses.

I have been on both sides of the table in the above sort of situation - both a capital provider to businesses and seeking to get funds for businesses I have started. I created an innovative firm in what is now called fintech 5 years ago. It used payment processors and the chargeback issue talked about above was always an issue - really a stick used to beat us - why?...

IMO the established guys (big banks, mastercard, merchant service providers, etc) are always messing with the newbies. Partly this as they need to interpret their responsibilities in areas that are new and where legislation, regulation and precedence are not clear. But a significant element is also about keeping these disrupters at heal.

As an example, I was knocked back for a basic business account by every high street bank in the UK. A variety of spurious reasons were given but really it was about competition (regardless of how remote). So I created a financial structure that went round the mainstream banks yet created the payment related infrastructure I needed...only to find that 6 months down this line the costs escalated massively when various service providers put my business in to high risk transaction category...not as our actual transactions were high risk but as we didn't have a high street bank banking us. Its a complex mess and in the UK it is aided by the FCA's massive incompetence. Anyway, I eventually (9 mths and a lot of burned time and capital later) got a high st bank basic business account for my startup. It did require me to be "economical" with the truth and present the business plan in a certain manner. Am I bad? My only choice was to play the mofos.

Anyway, you get the picture...I've been somewhere near the issues in this case - as a provider of funds at a similar scale and as seeker at an earlier smaller stage.

80%+ of successful entrepreneurs in tech, finance and data lie or break rules (for other areas it'll be more than half). It would be impossible to make progress if they didn't. Being 100% honest and/or sticking to rules means you don't get anywhere with service providers, getting thro the regs, funders, etc. Most of the time it is lying by not saying something or correcting a perception. The other side also lies (to themselves) as they do want to do business and will allow themselves to fabricate a bit. Its a complex and fckd up game.

The payment processing space and services to all these small businesses is a real wild west particularly going back in time. Note the UK has only just started a payments processor regulator. Prior to this the rules and behaviours are dictated in very unclear and changing manner with, as I said above, the established players simultaneously seeking to make a buck out of newbies and mess with them to keep down competition.

Tal did a wrong. But he's really unlucky to be caught out like this. His problem is that Great Hill were idiots and then willing to spend a lot of money saving face through long legal proceedings (I wonder if this was pursued thro litigation financing?). I'm saying this amorally and reflecting on the space....and in the knowledge that my honesty didn't pay-off when the essential £1.5m funding I had arranged fell through when I honestly told the investor that we were having an argument with the FCA around legislative issues. I won but it took nearly a year but the investor disappeared at the beginning of the period due to "regulatory risk".

The environment is so complex and murky that being careful with the truth is essential. Buyer beware! Ugly....but this is were innovation is coming from. Do you think there are no flies on Bezos, Google guys, Jobs, Gates, etc?

The Taptica International (LON:TAP) share price is ridiculously low unless there is a specific fraud in play. The evidence is that they make real cash and that they have been very effective at growing and pivoting the business. I'm happy that they make an acquisition rather than give money back as it seems they can create huge value with it (past evidence good on this). And I hope that Tal still has a channel to the company so as they can benefit from his entrepreneurial abilities.

DYOR as it obvs doesn't feel safe.

Ciao

AnonymousUser252054

22nd Jan '19

Paypal's threat was over chargebacks exceeding 1%. They pinpointed for Tal the 16 self-onboarded bad sellers causing them and which Tal quickly removed as requested. Tal had concealed Paypal threatening to walk away over chargebacks as he assumed this was fixable. Indeed the chargebacks for the next month then dropped below 1%. Paypal acknowledged the chargebacks were now in line but walked anyway, days after the sale.

mojomogoz

22nd Jan '19

Yes. I read the above. I have experienced this sort of uncertainty through another payment processor relationship even though our chargebacks were close to zero and our transactions were not cross border or with 'high risk' customers. Going back several years (I say that as maybe it has become more clear and less uncertain) the rules of the playing field were very amorphous...it was often beyond clearcut regulation and often opaque. Paypal et al wanted to transact with as many 'fintech' businesses as they could...so paypal will have known that some of Plimus's customers were beyond the pale as they will have realised for a very large percentage of their client base as the interest in using paypal was in escaping the conventional avenues for a variety of reasons.

There are echoes of what bitcoin became and how it is used in the above. People seeking to avoid convention. Sometimes this is non legal activity and sometimes it may be called disruptive innovation. As an aside, the growth in power of the City of London post UK empire can be viewed as being its ability to facilitate 'non conventional' transactions and transactors.

All very murky....but it is the area as well as Tal. Anyone making it work with 'disruptive innovation' in this area is likely playing fast and loose with the rules and so perhaps the truth. I'm not excusing it just giving my knowledge and opinion.

There's no evidence that Taptica International (LON:TAP) is involved in illegitimate business. There's some angst around the data privacy and abuse issue...segue, the FCA accused my business of doing this and that we must be selling data to make money (given that we wanted to charge our customers much less than competitors)...they had no proof of this and was just an unjustified allegation...it would have been criminal for me to do this as in our terms and very clearly on our website we made it clear we would not sell personal data...we were using Facebook data to run psychometric tests on customers using US military research amongst a variety of other things for credit risk decisioning and a bit later we took the decision to actually feed the profiling data back to our customers so as they could see what we were doing (we felt the openness was advantageous to our perception as a business and broad risk management aims). That the FCA would make this allegation without evidence illustrates both incompetence and how far behind the curve in understanding what's going on.

The segue above serves to illustrate what a messy frontier area this is. With regard to Tal and Plimus...they probably had threats from Paypal, regulators, other service providers, etc on an ongoing basis. As far as my experience goes it tells me this was very much the norm. Transform that into another area...take Boohoo (LON:BOO) for example...it looks very possible that they played fast and loose with employment standards at their UK based garment producers to feed their disruptive model....or into the biotech area in general which was often (probably still is) beyond the understanding of regulators and many more mainstream parts of the industry. I bet there is a lot of dodgy shenanigans....I was a investor in public market biotech businesses from about 2010 onwards as a contrarian (after doing several years of leg work) and it was shysterville.

An interesting discussion. You guys may disagree with my interpretation of Tal (who I do not know even in any remote way)....but the issue is share price of Taptica International (LON:TAP) which is ridiculously low....

BUY (dyor obvs!)

LovelyLovelyGorgeous

24th Jan '19

Bump

mojomogoz

24th Jan '19

Yes. Nice. I’m not a trader or player for small pieces so looking for more. Obviously newsflow is unpredictable so could be some bumps or just tired old holders or short term opportunists selling out. But I’ll suck and see and play this for a bagger right now...dreaming that they make a great acquisition to boost global reach further

Taptica - True contrarian or potential disaster?

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David Cheong

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