Stackla and Facebook may cost Bailador Technology Investments Ltd (ASX: BTI) shareholders $12.6 million.
Bailador Technology Investments is an investment business which focuses on companies in the IT and media sectors. It looks for ideas in the growth stage which have been operating for two to six years, that are run by founders, which have proven business models, have the ability to generate repeat revenue, international growth potential, have a big market opportunity but require capital ($2 million to $10 million) to take on the opportunity.
What Did Bailador Announce Today?
One of Bailador’s investments is Stackla, which is “a social marketing platform that aggregates user-generated content (UGC), curates its display and integrates at various touch points within the marketing stack.”
Stackla aggregates UGC from sites such as Facebook, Twitter, Instagram, YouTube, and WordPress. The most common uses of UGC today through Stackla are: Social Hubs, Social eCommerce, Live Events, Competitions, Social Advertising and Data Visualisations.
It seems Facebook and Instagram are important to Stackla because Bailador has decided to write down the value of its investment in Stackla to $0 after court news.
On 19 September 2019 Stackla filed a temporary restraining order that would immediately restore the company’s access to the Facebook and Instagram platforms. Bailador understands that in today’s California court hearing, the US judge denied Stackla’s motion but permitted the company to file a motion for a preliminary injunction and suggested the parties meet commercially to resole the issue.
Based on the ruling and the continuing lack of access to Facebook and Instagram, that’s why the write-down to $0 was decided.
Bailador’s interest in Stackla is valued at $12.6 million, which represents 7.7% of Bailador’s pre-tax net tangible assets per share (NTA) at 31 August 2019.
There is hope – Bailador thinks it can realise material proceeds from its investment through a range of options, but it’s taking a conservative approach to valuation.
The investment company said it remains supportive of Stackla, its management team and employees and hopes for a positive resolution as soon as possible.
But this shows why investing in early stage businesses can be riskier, particularly when they rely on these large tech companies. Growth companies like the ones in the free report below could be good alternative ideas.
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