Sometimes UK smallcap stocks can become absurdly mis-priced. A position that international payments platform Finseta (£8.3m marketcap) currently finds itself.
Indeed despite generating gross margins of 63% on Est. FY’25 sales of £12.6m (up +11%), the shares have nonetheless fallen 2/3rds to 14p from their Jan’25 highs of 45p. Equivalent to a compelling 0.6x EV/revenue multiple for a scalable forex/fintech platform - especially compared to similar (albeit larger) payments firm Equals, which was acquired by PE firms TowerBrook & JC Flowers for 2.4x EV/sales in April.
This opportunity though hasn’t been lost on COO and largest shareholder (16.2% stake) Robert O'Brien. Who today converted £200k of his £2m loan note into equity at 19p/share (now 18% stake), representing a 35.7% premium.
Additionally Mr O’Brien has not only agreed to extend the remaining £1.8m of the debt from Jul’26 to Dec28 at an interest rate of 8.5% from 6.5% before - reflecting the rise in UK borrowing costs from when the original deal was signed.
But also accepted to vary certain elements of his compensation package, including decreasing his commission on certain revenue streams with effect from Feb'26. This, alongside the amended terms, is expected to be cash flow beneficial in future years.
So what does this all mean?
Well to me, today's news is a major vote of confidence for Finseta by a well informed executive director. Sure the business is presently investing in growth and has been impacted by the macro uncertainty caused by Trump’s Liberation day tariffs - which triggered a drop in HNWIs & SMEs investing in overseas property, M&A &/or other large investments.
Yet equally I believe this has now largely run its course, and top line growth should re-accelerate in 2026 on the back of investments in new products (eg mass payments, solutions, cards), higher customer numbers and overseas expansion (UAE, Canada, etc).
In terms of the numbers, house broker Shore Capital Markets are predicting FY'26 EBITDA of £1.2m on sales up 30% to £16.4m, and have a 45p/share price target. Net cash closed Jun’25 at £0.4m vs £0.6m Dec’24.
Disclosure: Finseta is a Vox Markets client.