RE: Sit back and relax26 Jul 2021 23:19
This is my 'angle' :
it seems that SYME's USP is marketed as a way of 'squaring a circle' :
(1) Banks (some) already do 'inventory monetisation' (IM), by way of warehouse receipts, @ 1% cost (attractive) but only up to 50% (security margin) and 'on balance sheet' (not helpful to credit-stretched customer, OK for everyone else).
(2) SYME proposes IM off balance sheet , on basis of 'true sale' (which is useful to all customers) and offers up to 85% monetisation (good for all customers = extra liquidity); but bad for lender/funder, because of lower - 15% instead of 50% - security margin ; but at around 6% cost (= expensive, which means it will only appeal to the less credit-worthy, who have fewer options)
(3) However, to pass a 'true sale' test under IAS 39, the customer typically needs to receive 90 % of the proceeds ie SYME's SPC funder/bank lender is further reduced to a 10% vs 'conventional' 50% security margin.
(4) So, potential funders are being offered a much higher return (6% vs 1%); against less security (10% shrinkage vs 50%); on a portfolio of potential customers that will - because of (1) above - inevitably tend to be poorer credits.
The poorer the credit, the more importance the funder will attach to its security.
SYME has sought to credit-enhance the inherent security shortfall/transactional risks with a slew of measures : cash margin; credit insurance; technology (IoT, blockchain, RFID, etc).
Up to now, despite heroic efforts, SYME hasn't found any funders who think the proposed 'reward for risk' trade-off is sufficiently attractive. And it's not clear to me what can be done to change that fundamental sticking point.
Putting it bluntly, SYME has been trying (possibly quite sincerely) to put lipstick on a pig.
It would be fascinating to get Tom James's views on this conundrum."
Let's see whether anyone's brave enough to ask at the AGM.
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