TechFinancials IBID Joint Venture
This TechFinancial IBID Joint Venture comes hot on the heels of another TechFinancials JV with Optionfortune Trade which, like IBID, is another Hong Kong-based company.
This TechFinancials IBID Joint Venture will consist of a new corporate entity 51%-owned by TechFinancials and 49%-owned by IBID Holding Limited.
TechFinancials is a provider of binary options reading platforms to its B2B partners, binary options brokers of which 24option is their biggest client.
TechFinancials also has a B2C arm with their in-house website OptionFair now joined by Optionfortune in January.
According to IBID’s website:
“IBID is an umbrella organization investing in and buying companies across a number of different sectors, predominantly internet-based companies, with the aim of releasing the potential of businesses, sustainably improving operations and generating significant growth and profitability.”
The TechFinancials Press Release provides the rationale for the JV with:
“The JV will leverage the expertise of the Group and IBID to accelerate the growth of one of the B2C binary opEons trading brands of the Group with an objective of increasing the Company’s B2C market share, revenues and profitability.”
TechFinancials role in the TechFinancials IBID joint venture will be to provide the technology to the JV entity along with transferring all other intangible assets relating to the brand.
IBID in turn will invest US$300,000 in the JV company and will continue to finance the JV company until $100,000 net profits per month is achieved for three consecutive months. The target day for the JV to achieve these results is 31st July 2017.
Working Capital & Additional Investment
Any additional finance over and above the US$300,000 that IBID injects into the JV company will be considered a premium on the initial US$300,000. At present the value of the company sits at:
US$300,000 / 49% = US$612,245
If IBID then puts in another US$100,000 then the value of the company becomes:
US$400,000 / 49% = US$816,327.
So if IBID’s marketing effort fails the value of the company goes up. If IBID’s marketing succeeds to the tune of $100,000 net profit per month, then on a P.E. of, say , seven the company is worth US$1.2m x 7 = US$8.4m. A win-win position for TechFinancials.
Bearing this in mind it would be most interesting to see the legal position of each of the partners to the JV should IBID decide it’s not worth the efforts and reneged on the deal by not injecting more capital as and when needed.
If the net profit target of US$100,000 is not reached the two parties to the joint venture would have to return to the bargaining table to hammer out new terms to the agreement.
Commenting on the Joint Venture, Asaf Lahav, Group CEO of TechFinancials, said: “The Company is very pleased to be forming this Joint Venture with IBID. The Board believes the JV will prove highly beneficial to the Group, providing sales and marketing expertise and additional working capital to grow the brand. In addition, we believe that the combination of mutual strengths of the Company and the Partner will substantially strengthen operating performance. The collaboration continues our stated strategy at IPO which is to further expand our business through partnership with key players in the online B2C space. The Board believes the JV will improve the long-term sustainability and consistency of our growth prospects while generating extra cash flow.”